Consumer group calls for clean-up of troubled timeshare traps

Timeshare schemes that grant people access to holiday accommodation for a set period of time are in the crosshairs of a leading consumer group that wants the regulator to clamp down on the schemes.

Consumer group CHOICE is calling on the Australian Securities and Investment Commission (ASIC) to clean up the industry, pointing out several timeshare schemes that trap people for decades in poor value products.

CHOICE has launched a complaint with ASIC that alleges at least eight industry-wide potential breaches of the law.

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CHOICE spokesperson Patrick Veyret said it was important that these schemes were treated seriously by the regulator.

“The timeshare industry is causing deep harm to people through high-pressure sales tactics, poor financial advice and terrible value products that trap people for multiple decades,” Mr Veyret said.

CHOICE collected data from 350 timeshare members on their experiences with the industry as part of the complaint.

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From this survey CHOICE found that: 

  • 30 per cent of the case studies wanted to exit their timeshare scheme but couldn’t. 
  • 70 per cent of the case studies said they expect that the timeshare schemes, ongoing cost and debt will pass on to their children. Many timeshare operators tell people that the costs will be passed on to their children, but CHOICE and legal experts consider this to be misleading and deceptive conduct.  
  • Timeshare providers are forcing people to pay exorbitant fees to exit some timeshare schemes. One case study reported that they were asked to pay $29,000 in fees to switch to a shorter contract timeshare scheme.

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“Many people are stuck in unfair and expensive contracts running for decades and being told by the timeshare provider that they need to pass this burden on to their children,” Mr Veyret said.

“CHOICE has launched a super-complaint to ASIC on the troubled timeshare industry in an effort to get the regulator to take these matters seriously.

“We’re disappointed and frustrated by ASIC’s limited enforcement action while people are struggling with timeshare products.

“ASIC has the power to act against unfair and predatory practices in the industry, they need to use it.”

Since 2016, CHOICE has written four complaints to ASIC about potentially illegal conduct within the timeshare industry.

CHOICE’s super-complaint alleges there are so many breaches of the law that it questions whether the timeshare industry should be allowed to operate with existing business practices.

“CHOICE is also calling on a federal government inquiry into the timeshare industry focusing on people stuck in legacy products,” Mr Veyret said.

“The federal government needs to find ways to help people trapped in old-style timeshare schemes with few practical ways out.”

What are timeshare schemes?

Timeshare schemes are complex financial products that grant people access to holiday accommodation for a set period of time.

There are two main types of timeshare product:

1. Title-based schemes. A title-based or legacy timeshare scheme is where a member enters into a contract that grants them access to use a specific property for a set period of time. Contracts can last up to 99 years. These schemes are no longer sold in Australia. However, CHOICE has heard from consumers trapped in legacy schemes who are told by providers they are unable to exit.

2. Points-based schemes. A point-based timeshare scheme is where members buy points and redeem them for holidays at specific resorts or holiday accommodation. For example, a consumer buys a 6000-points-a-year membership for a one-off cost of $30,000. Every year, they would receive the 6000 points – but also have to pay annual fees and costs every year. This allows you to spend points at specific holiday destinations. These point-based schemes are often for a fixed period, with some contracts lasting more than 60 years and costing more than $450,000 over the life of the contract.

Key problems with the timeshare industry:
1. High-pressure sales tactics.
Salespeople regularly use coercive tactics, including same-day ‘exclusives’, placing time pressure on people to make a decision, and obscuring certain terms and conditions to pressure people into purchasing a timeshare product.

2. Poor financial advice. Salespeople sell people into complex timeshare contracts that can last more than 60 years and can cost more than $450,000. CHOICE is concerned that the advice provided to people attending timeshare presentations is of poor quality and very seldom is in their best interests.

3. Terrible value. People are sold in schemes that are often incredibly poor value. In 2018, CHOICE found that some timeshare contracts are over 938 per cent more expensive than booking directly online.

4. Timeshare operators trap people into contracts and make exiting extremely difficult. Many timeshare providers say people are locked into the scheme and cannot practically exit. Other providers make people pay exorbitant exit fees to switch to a different scheme.

Have you ever entered into a timeshare contract? Did you think it was good value? Were you trapped into paying exorbitant fees?

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Written by Ben



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