Firstly we feel it necessary to point out that the Financial Ombudsman Service (FOS) has no jurisdiction in relation to unregulated claims such as those being processed through the Spanish courts for timeshare sold in contravention of Spanish law 42/98. The FOS deal with disputes regarding regulated activities such as claims presented relating to the Consumer Credit Act 1974.
Is the FOS needed?
The simple answer is yes, we will expand on this later. Firstly, what is an ombudsman? Here is a basic definition:
“An ombudsman is a person who has been appointed to look into complaints about companies and organisations. Ombudsmen are independent, free and impartial – so they don’t take sides.”
The FOS themselves describe their service rather simplistically:
“The Financial Ombudsman Service is a free and easy-to-use service that settles complaints between consumers and businesses that provide financial services. We resolve disputes fairly and impartially, and have the power to put things right.”
So why is the FOS needed? Most of the work carried out by the FOS involves claims against banks and other credit funding organisations in relation to consumer grievances where the individual considers their lending is either illegal or unfair, this is a simplistic view and of course the reality is somewhat more complex.
Many will remember the Payment Protection Insurance (PPI) scandal a few years ago. Initially most claims were rejected by the offending parties and so the FOS became involved. We all know now that once the scandal broke, most consumers were settled without argument, the upshot of which is that the final bill to the finance industry was estimated to have cost in the region of £53bn to £60bn to put right.
Being cynical, because of the cost to “put things right”, mention the word “claim” to a financial institution often receives the response “the answer is no, now what’s the question?”Lenders know that rejecting claims for whatever reason leaves the claimant with only one route to redress and that is to engage the FOS.
Our research has established that like many government bodies, the FOS is over worked and under staffed. In a number of cases 18 months to two years may be the expected time from complaint submission to receiving a decision. Even if a lender knows that it is likely that the FOS will uphold the claim, the action rejecting such claims buys them precious time.
The process
Upon the rejection of a claim by an institution and submission to the FOS, firstly an investigator will collate evidence from both the complainant and the institution. After investigation a decision will be made. If either the complainant or institution disagrees with the decision they have 14 days to challenge. Upon a challenge the case is then passed to a senior investigator and the same process occurs. Again if disputed the case is then reviewed by an actual Ombudsman. Normally the Ombudsman’s decision is final; however there is still the opportunity for progressing to a Judicial Review, but this is rare. That said recently there has been such an instance, our article covering this may be viewed here.
FOS and Timeshare claims
Credit card claims under Section 75 of the Consumer Credit Act 1974, mostly for payments to scam companies are fairly straightforward, however as most scammers cannot obtain a card facility they are also small in number.
With entry level timeshare costing around £20,000, finance loans have become more prevalent to facilitate purchase. The big players being Clydesdale Financial Services, trading as Barclays Partner Finance (BPF), Shawbrook Bank and Novuna Personal Finance, formally Hitachi Finance. Of late more and more timeshare related claims are being presented to these lenders, many of which are rejected and end up at the FOS.
It’s impossible to quote exact numbers of complaints that the FOS are handling but some figures we are privy to do tell an interesting story. In April this year an interested party requested information from the FOS based on the Freedom of Information Act, his request was as follows:
A FOS data and protection advisor kindly supplied some information. Unfortunately, the FOS don’t record data relating to “trading as” entities so the only figure they could supply was that of the parent company, being Clydesdale Financial Services, the figure quoted was 13,000 complaints in the last 10 years but this is meaningless because the loans attributable to BPF cannot be extrapolated.
Of interest is that the FOS has been keeping records manually concerning complaints regarding BPF in relation to both Silverpoint and Azure. In the last financial year, April 2021 to April 2022 the FOS said the following:
The tip of the iceberg
The figures quoted by the FOS only take into account two timeshare operators and only one financial year, furthermore they only apply to one lender. When taking into account all the developers who have finance facilities with BPF, then factor in the other two major lenders we think that saying these figures are the tip of what might be a very large iceberg is far from inaccurate.
A full copy of the redacted FOS response may be downloaded here:
Precedent law
Whilst the FOS has legal powers to use at their discretion, unlike a judge they cannot create a precedent. Sometimes there is a discontinuity regarding decisions. Both lawyers and claims management companies find this anomaly frustrating. An identical case may be dealt with by different investigators and therefore different decisions are arrived at.
Earlier we mentioned a judicial review; this may present the opportunity for a precedent to be created. When such a precedent is created it allows for citing in same or similar cases. So what is a precedent? The doctrine of precedent dictates that a court must follow decisions of previous judicial decisions of the same or higher court in cases that are similar in relation to the facts and the legal issues. Often described in Latin as “Stare Decisis” translated, let the decision stand
As an aside, one of the earliest precedents that still has the same power today as then is a case that took place over 400 years ago, the chief justice, Sir Edward Coke, ruled that King James I could not prohibit new building in London without the support of parliament. King James believed that he had a divine right to make any laws that he wished. But the court opposed his view, and decided that the monarchy could not wield its power in this arbitrary way. This is known as The Case of Proclamations, 1610. This precedent means that no current or future monarch can build in London without the requisite permission from Parliament. If they tried to do so the doctrine of The Case of Proclamation would be followed by the courts.
Finally
The subject of lending surrounding timeshare purchase is certainly an area that is causing great concern to many timeshare owners. Unsecured or subprime loans cost substantially more than all other forms of lending, perhaps with the exception of credit cards. Many timeshare owners failed to realise the ramifications of entering into such loans.
Apart from those developers quoted in this article, cases from other resorts, developers and lenders are now finding their way to the FOS. After a recent decision by an Ombudsman against BPF, the bank decided to challenge this by judicial review, the presiding judge decided to no give them permission for the judicial review, however BPF have appealed, and after the hearing permission was granted. If BPF fail at the judicial review this could well create a significant precedent but let’s not jump the gun.
If you are affected by finance relating to a timeshare purchase and would like to share your story please feel free to get in touch. Also visit the site regularly as we will be publishing news surrounding timeshare and finance as and when we have updates.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk