Section 75 of the Consumer Credit Act, timeshare linked loans and timeshare purchased by credit cards
In a recent case, an unfair relationship arose between a lender creditor and consumer debtor, where a timeshare purchase agreement which was supported by way of a related loan was deemed an “unfair relationship”. The timeshare contract provided that the whole capital asset would/could be forfeited for the non-payment of management or other peripheral charges.
The High Court in England sat in the matter of Link Financial Ltd v Teresa North Wilson.
Wilson attended a timeshare presentation and acquired the timeshare product. In doing so, she entered into a fixed sum loan agreement with Link Financial Ltd (Link).
The loan was solely acquired to fund the purchase of the timeshare product. The purchase price was just over £20,000. Wilson [when acquiring the loan] did falsely provide particulars of her income and despite being unemployed at the time.
The timeshare contract provided that “if Wilson did not make any payment due under the contract within 14 days’ notice”, the timeshare seller (vendor) could rescind the contract and she would forfeit all money paid.
Wilson did fail to pay her timeshare management charges and also the Link loan instalments. The timeshare contract was then rescinded by the resort and Link sought to recover the sums due under the loan they provided. The thrust of the Wilson defence was a claim that an unfair relationship existed between the timeshare resorts and Link under s140 of the Consumer Credit Act 1974 because of the forfeiture provision in the related purchase agreement. This was an interesting defence to the Link claim and one that required High Court clarity.
At first reading, the court held there was no “unfair relationship”. This was because there had been no high-pressure selling and no contraventions of the Timeshare Act 1992. Wilson was educated and did understand all the agreements she entered into and had effectively lied about her income. The lower court issued a judgment against Wilson for £41,000 (which included Link’s interest and costs).
Wilson had a mind to appeal and did just so, pleading that the contract was unfair because of the effect of rescission and forfeiture. She explained that she could not rely on the inherent capital value of the timeshare to reduce the loan debt.
The High Court allowed her appeal and determined that the relevant clause in the timeshare agreement was unfair and gave rise to an unfair relationship. Wilson should have been allowed to use the capital value of the timeshare contract to fully or partly repay the Link loan. As there was no expert evidence available as to any retained capital values associated with the timeshare product the court ordered that no further sums should be paid to Link by Wilson.
The relationship and the establishment of it, was with Link (and every other timeshare lender). They alone are required to prove that the agreement was fair not the consumer. Link had failed to do so, therefore the consumer case was successful.
The dishonesty as to her income claim was relevant as that was not the basis upon which the agreement was rescinded and therefore, its causative weight and relevance were much lower than it might otherwise have been.
Last modified: 3rd September 2020