- UK High Court upholds Financial Ombudsman Service's support for families and individuals who were mis-sold "fractional" timeshare ownership schemes
- Thousands of victims were wrongly sold fractional schemes or "upgrades" by major timeshare companies. Judge rules that these schemes breach consumer protection laws and timeshare regulations
- In echoes of the PPI scandal, Mrs Justice Rowena Collins Rice also rules that banks providing the loans for these fractional ownership schemes are liable to recompense customers in full both loans and interest payments
- Victims must have taken out loans or made interest payments within the last six years to be eligible
- Praetorian Legal represents hundreds of victims who are now entitled to full compensation, and urges other victims to claim what they are owed
Tens of thousands of British families are in line for life-changing windfalls after a High Court judge ruled that a popular form of timeshare scheme was systematically mis-sold.
Banks including Barclays and Clydesdale, which lent victims the money to make these mis-sold investments, must now repay borrowers in full, Mrs Justice Collins Rice has ordered.
The judgment comes after the banks challenged an earlier decision by the Financial Ombudsman Service to put banks on the hook for the repayments. Following a judicial review, the FOS ruling has been upheld and as a result the banks are liable to repay an estimated £100 million to investors who have so far lodged complaints with the FOS.
Gary Smith, executive director of claims firm Praetorian Legal, represents hundreds of individuals and families who bought so-called "fractional ownership" timeshares from the early 2010s onwards. He urges thousands more victims who have not come forward so far to do so. Consumers were sold these schemes on the basis they were investments as well as holiday destinations which is a breach of consumer protection rules and timeshare regulations.
Victims typically took out loans of tens or hundreds of thousands of pounds to fund their purchase of these long-term schemes. Families were put under financial pressure by entering into these loan agreements. Some buyers were saddled with growing debts as interest charges accumulated over years. But their ability to exit the schemes was very limited.
Gary Smith said:
"We welcome today's ruling, which at long last provides families with certainty that they will get the money they are owed. Our understanding is that the banks in question are now making provisions in their account to remediate victims of this mis-selling, and establishing a claims mechanism that hopefully should see remediation happen with a minimum of fuss.
Of vital importance now is that victims, who may not be aware of this recent ruling, come forward with their complaints, so that they can get remediated. We must not allow a "lost generation" of hard-working families and elderly people to miss out on this chance to claim what is rightfully theirs.
Anyone who took a bank loan to pay for a fractional ownership scheme in the last six years, or who took out a bank loan before 2016 but has made interest payments on it within the last six years, should be eligible for compensation.
It is right that banks are footing the bill for this. They funded and benefited from unscrupulous timeshare companies preying on families with high-pressure sales tactics and false investment promises. Some of those timeshare companies have unsurprisingly gone bust in the meantime. As for Barclays, Clydesdale and Hitachi, if they hadn't turned a blind eye to what the timeshare firms were doing, they wouldn't be in this position now."
Further details of the recent ruling and its implications are below. The reference for the court case, heard at the Queen's Bench Division of the High Court, is EWHC 1069 (Admin), Case Nos: CO/506/2022 CO/4312/2021. The ruling can be found online here.
Making a Claim
To be eligible to claim, you must have made a finance payment towards your fractional ownership timeshare scheme at any point from 1 January 2018 onwards. Your loan agreements can have been set up at any point from 2012 onwards, so long as you have made at least one repayment to the finance company after January 1, 2018 to date.
Praetorian Legal are specialists in timeshare termination. A claims management company authorised by the Financial Conduct Authority, Praetorian Legal have managed these processes on behalf of thousands of victims.
For further advice and guidance and support in making a claim, contact Praetorian Legal by phone, email, or through the Praetorian Legal website.
Don't let the banks hold onto money which should rightly be returned to you.
Background to the ruling
Between 2012 and 2018, an estimated 20,000 customers purchased so-called "fractional ownership" schemes, typically financed by high-interest loans from lenders such as Barclays, Shawbrook, Hitachi, and Clydesdale.
Many customers were subsequently dissatisfied with a number of terms and conditions attached to their timeshare contracts, from maintenance costs to accommodation availability. Crucially, an important part of the sales pitch made by the timeshare sellers- which included companies such as Diamond Resorts and Club La Costa -was that the timeshares were an investment.
The Financial Ombudsman Service (FOS) subsequently received hundreds of complaints from aggrieved customers of fractional ownership schemes. It then identified two test cases to investigate in further detail. Its conclusions were that these schemes had been marketed as investments, which is prohibited under Section 14(3) of the Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010.
The Ombudsman's findings also affirmed that it was the lenders, having provided financing on these transactions as creditors, who were ultimately responsible for this mis-selling as per Section 56 of the Consumer Credit Act 1974.
Two banks who funded these timeshare products Barclays and Shawbrook challenged the Ombudsman's findings by way of judicial review. In a judgment issued on May 5, 2023, High Court Justice Rowena Collins Rice dismissed this challenge.
In their challenge, the banks had argued that it was possible for timeshare agreements to be sold without any element of investment. The judge, however, dismissed this argument, noting that while this may have been possible in theory, this was not what happened in practice.
The banks also argued it was the timeshare companies who were ultimately responsible for the mis-selling. The High Court also struck this down, noting that the unfair contracts in question should be attributed to the lenders under the deemed agency provisions of the Consumer Credit Act.
Consumer Implications
The recent High Court judgment means that providers of loans for fractional ownership timeshare schemes must reimburse victims for what they paid into these schemes, including the interest paid on loans. The reimbursement process will be managed by the FOS.
Approximately 5,000 claims representing an estimated total of more than £100 million have already by been lodged and will be processed for remediation. However, the total universe of potential claims is believed to be five times this 25,000 claims and a total of £500 million. This represents approximately 20,000 victims, some of whom paid into multiple schemes.
The above figures are conservative estimates based on the known number of fractional ownership schemes sold by Club La Costa and Diamond Club, the approximate total interest paid by victims on these schemes, the number of claims currently managed by Praetorian Legal, and the approximate number of claims managed by other claims management companies.
ENDS
View source version on businesswire.com: https://www.businesswire.com/news/home/20230530005404/en/
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