Timeshare and fractional ownership is an increasingly popular way of taking holidays but owners should be on their guard against fraudulent operators targeting them.
The process of buying timeshare is a safe one. By law, purchasers signing a contract in the EU are protected by the European Timeshare Directive and, importantly, have the right to a minimum 10 day cooling off period during which they may cancel the agreement without penalty. In addition, companies in membership of the trade body, RDO (Resort Development Organisation) sign up to a code of conduct that provides consumers with extra levels of protection. RDO offers a free of charge service to members of the public who have a query or complaint about one of its members and a cost-effective dispute resolution scheme is available if the complaint is not resolved to the satisfaction of the consumer.
Fraudulent Practices Affecting Timeshare Owners
The number of complaints about timeshare is at an all-time low but there are, however, operators outside of the industry that prey on timeshare owners and defraud them. The most frequently reported activities include:
Bogus resale offers – timeshare owners receive a call out of the blue and are told that a buyer has been found who is ready to pay a high price for their week, often close to the original purchase price. A fee is, however, required from the owner in order for the sale to proceed.
The reality: more often than not, the sale fails to take place and the timeshare owners are unsuccessful in obtaining a refund of monies paid
Holiday club offers – timeshare owners receive a call out of the blue or respond to an advertisement to discuss ways in which to dispose of their timeshare. They are invited to attend a presentation during which they are told that the company will take over ownership of their timeshare, so the annual management fee will no longer be their responsibility. At the same time, they are persuaded to sign up to membership of holiday club, frequently with the promise of cashback (see below)
The reality: the company frequently fails to take over the customers’ timeshare, leaving the management fees still liable for payment each year. Furthermore, the customers have signed up to membership of a holiday club which they probably never wanted in the first place! Holiday clubs claim to offer savings and discounts at luxurious resorts around the world but the discounts are not guaranteed and many customers have reported that the reductions are no better than those available on the high street
Cashback offers – this tends to be used as a hook to persuade people to sign up to a holiday club. There are also cases of members of the public later being called by a separate company to be told that their cashback certificate has not been correctly registered. As a result they are invited overseas to find ways around the problem and pay a further sum of money to another company they know little or nothing about
The reality: the vast majority of people will not be successful in cashing in their certificates. Most schemes are deliberately designed to make it almost impossible to recoup the value of the certificate
Class actions – timeshare owners receive a call out of the blue or respond to an advertisement inviting them to join a class-action against their developer or exchange company. At a subsequent presentation they are instead persuaded to sign up to membership of holiday club
The reality: the majority of these class action schemes are bogus, the primary objective being to persuade people to sign up to holiday club, something that is never made clear in the company’s initial contact with timeshare owners. Far from being a straightforward process, the reality is that in Europe, class actions can take many years to come to a conclusion and there is no guarantee that these will ever be successful and that money will be paid out. RDO is unaware that court proceedings have in fact been instigated
New legislation to protect consumers
In February 2011, a new Directive comes in to force that provides timeshare buyers with additional levels of protection, namely a 14 day cooling off period throughout Europe (currently this is only 10 days in Spain) and a ban on taking deposits.
The new legislation also covers holiday club and resale contracts and requires that they too provide a cooling off period and they may not take an upfront fee. Furthermore, the payment for a holiday club must be divided into equal yearly instalments, with a cooling off period provided when each payment is due.
RDO advice to members of the public
- Never respond to cold calls – your details have probably been obtained illegally
- If you’re not sure of a company’s credentials, check it out with RDO on email@example.com or TATOC, the timeshare owners’ association, on 0845 230 2430
- If you’re looking to sell your timeshare, contact a resale member of RDO and never use a company that hasn’t signed up to its code of conduct
- Do not agree to travel to a resale company’s offices, whether in the UK or overseas. There is absolutely no need to do this and you may well find that rather than selling your timeshare, you are persuaded to sign up to a holiday club
- Be careful of accepting invitations to join class actions as the actual claim may not exist or be quite as risk free as promised. You may also find that if you attend a meeting to discuss such an action, you are in fact being sold a holiday club
- Do not agree to post your ownership documents to a company you don’t know is reputable. You may never see the paperwork again but at the same time if the sale is not finalised, you may still be liable for your annual management fees
RDO (Resort Development Organisation) is the European trade body for the timeshare and fractional ownership industries. Formerly called OTE, it was created in 1998 to promote fair trading and growth within the timeshare industry and to encourage the highest service standards amongst its members.