Examination of Witnesses (Questions 1-19)
MR GARETH
THOMAS MP AND
MR KEVIN
DAVIS
17 OCTOBER 2007
Q1 Chairman: Can I welcome you, Minister,
for the first time to this Committee in your new role as Consumer
Affairs Minister as well as Minister for DfID. Would you like
to introduce your colleague to members of the Committee?
Mr Thomas: Sure. Kevin Davis is
a senior official who works within the Department for Business
and Enterprise who works on the Timeshare Directive.
Q2 Chairman: Can I just thank you
at the beginning for the additional letter you sent us; we will
not specifically take the letter separately, but if you wish to
refer to it, obviously, in answering any of our questions, it
has been placed before the Committee. When this Committee considered
the matter in July we agreed that the Timeshare Directive of 1994,
the one that is in existence, was one of the EC's notable successes.
What do you see as that directive's particular strengths?
Mr Thomas: The particular strengths
of the directive—and I agree with your description of it—has
been the dramatic reduction in the level of abuse within the timeshare
industry from some of the excesses that members of the Committee
will be aware were prevalent in timeshares in the Eighties and
Nineties. Our sense now is that we do need a review of the directive;
we have pushed for a review, there are a number of new timeshare
products that have emerged which we think need to be brought within
the scope of the review and a number of new practices within the
timeshare industry where, bluntly, rogues are operating and scams
are taking place—that relates to holiday clubs and the behaviour
of some resale agents. We have been seeking, therefore, to bring
those into the directive.
Chairman: I am just trying to get on
the record what you think are the particular strengths of having
the Timeshare Directive at all. Mr Dobbin?
Q3 Jim Dobbin: Welcome, Minister.
What is the advantage of having EC legislation on timeshares and
similar holiday products?
Mr Thomas: To come to your point
and indeed the point, Mr Connarty, that you were asking, one of
the benefits of the directive for example is the requirement for
a cooling-off period for people who are approached by timeshare
sellers, often out of their country, out of their comfort zone,
away from support networks that they are familiar with. If they
have a cooling-off period they have a chance to consider in their
own time and at their own leisure whether or not they will then
want to follow through on buying a timeshare or not; that has
proved to be one of the key benefits of the directive and indeed
those who do want to cancel appreciate the fact that that requirement
is there in the directive and allows them to change their mind
without cost.
Q4 Jim Dobbin: Could I just follow
that through? The normal way we think of approaches is directly
in Spain or other countries. Would this legislation apply equally
to the telephone approaches that we all get from time to time
where the issue is selling timeshare?
Mr Thomas: Anybody trying to sell
a timeshare, Mr Dobbin, to you or indeed to any of your constituents,
must comply with the terms of the directive and the level of abuse
that there certainly was and that we are all familiar with is
not there in the same way in terms of timeshare agreements in
general terms. The particular concerns that we have been picking
up lie with holiday clubs and the behaviour of some resale agents.
We also think we need to broaden the definition of timeshare so
that it includes non-fixed accommodation, so it is the yachts,
cruises, boats and timeshare arrangements that have increasingly
emerged in the last decade or so.
Q5 Mr Hands: In the written material
we can see why, but can you just outline again what in your view
is wrong with the 1994 directive and why is the proposed new directive
necessary, but also why has it taken 13 years for many of these
faults to lead to a new directive because it is our impression
that some of these have been known for quite some time.
Mr Thomas: Mr Hands, as I think
I made clear in my earlier answers there are essentially three
areas of change that we want to see, and this new directive that
is being negotiated offers the opportunity for those three areas
to be developed. We need to broaden the definition of what is
a timeshare and, secondly, we need to bring holiday clubs into
the legislation and we need too to deal with the activities of
those resale agents. Those are the three key areas. There are
then some essentially tidying-up requirements that we want to
do in terms of the quality of the information that people have
to provide before contracts are signed, but those essentially
are the three main areas. We have been pressing for a review of
the directive; my predecessors and I have been seeking to gather
the evidence for the case for change. My immediate predecessor
Ian McCartney wrote to and met with the commissioner responsible
for this directive to make the case for change and indeed to set
out the particular priorities that we have alluded to. This is
a particular issue which affects British consumers and it is one
of the reasons, therefore, why we have engaged as closely with
the process as we have.
Q6 Mr Hands: It has still taken quite
a long time and, indeed, there is the abuse of, for example, the
36-month rule with timeshares being sold on a 35-month basis,
which we have known about for some time. Now there is the 1994
directive and we are now in 2007; when did you first start making
representations to the Commission to seek a new directive?
Mr Thomas: We have been making
representations to the Commission for a period of time; we have
also been working with a number of different players to build
the evidence base to justify the changes that we have been seeking.
For example, we have been working with the OFT, we have also been
making our own representations to the Commission. We have used
research which the OFT has produced into the potential for holiday
clubs to cause people a real loss and we are now at a stage where
we have the political will within the Commission and amongst Member
States for changes to be made, and we welcome it.
Q7 Chairman: I wonder if Mr Davis
can help. It is quite interesting talking about how long the process
takes because, clearly, there have been stories for a decade at
least of new scams developing. I was just wondering whether Mr
Davis knows any more of the history of how these things feed through
into the public policy debate and then how they are taken on board
by the Council and the Commission.
Mr Davis: Yes, Chairman, I have
been aware of this issue for about six years actually and we have
been making approaches to the Commission. This proposal of course
is against the desire of the Commission to see a wider review
of what is known as the consumer acquis which are the eight consumer-facing
directives, and so we have been pressing but they have been thinking
about what to do about the acquis. Eventually we have impressed
upon them, with the support of a couple of other Member States,
the importance of trying to take this one forward.
Q8 Mr Hands: To summarise, you have
been aware of the problems for six years. When was the first approach
made to the Commission to rectify it?
Mr Davis: That would have been
at official level and I am aware of approaches around four years
ago.
Q9 Chairman: Do you want to add something
to that?
Mr Thomas: The essential point
is that there has not been an unwillingness to act, the issue
has been what is the best device to do so and we have been seeking
to press for a very specific revised Timeshare Directive while
the broader consumer acquis, as Mr Davis has alluded to, is reviewed
in a slightly slower time.
Q10 Mr Laxton: I am pleased to hear
that you have a real concern about the holiday club aspect. I
can go back to a case in my constituency, it must have been eight
or nine years ago, and you sometimes wonder the way you have people
who are pretty sharp and alert—in this case it was a headteacher
of a school who I would have thought would be a switched-on individual
who was absolutely ripped off by a holiday club based in my constituency
in Derby. I was going to raise the issue of holiday clubs and
what you see as the problems with holiday clubs. I do not know
if you would like to flesh out a little more some of the issues
and concerns that you have got, but certainly I am pleased to
see that that is going to be drawn into the process, and not before
time.
Mr Thomas: The two essential problems
with holiday clubs are the gross exaggeration of the scale of
discounts where there are genuine discounts to be had, and high
pressure selling techniques to try and get people to sign up to
those holiday clubs. The sorts of money that are involved are
considerable, as you will know from your constituent's case no
doubt. The figures we have heard are anything from £3,000
right up to £20,000 on occasion.
Q11 Mr Hoyle: Can I take you back
to where we were and the question that was raised by Mr Hands?
You say that the Department knew about it for six years; the view
is—and the Chairman mentioned this—that it is 10 to
15 years that this has been going on. It took the Department six
years to work on this; has it been blocked by other countries,
do you think, or is there a view that this does not really affect
us so it is not a priority? To this country it is a priority,
I just wonder what the other EU members think.
Mr Thomas: It is a priority for
this country and it is a particular problem that affects a smaller
number of Member States. There has not been an unwillingness to
act by the Commission and indeed by other Member States and what
we have been seeking to negotiate and to press for is the right
way to address the problem and to build the evidence base for
change. Mr Davis described the wider review of all the different
consumer legislation that is taking place within the Commission
at the moment and we welcome the draft simplification because
that will help consumers here in the UK. What we have been concerned
with is that given the significance of this problem, in particular
to our consumers but not exclusively so, we think we need to do
a separate timeshare directive in order to accelerate dealing
with the problems that Mr Laxton has described and with which
the members of the Committee are clearly familiar.
Q12 Chairman: The question of how
these scams have been allowed in terms of whether legislation
is effective in its enforcement; having a directive theoretically
means that it is transposed into everyone's law in their own country
and then we will work together to make sure it is enforced. All
the stories coming back are of failures of that enforcement really;
at the moment how is the 1994 Timeshare Directive enforced and
have enough resources been allocated to it by the UK, who seem
to be the main sufferers. I heard a figure of 400,000 people approached
every year on holiday to buy a timeshare, many of which were suspect.
That seems like a lot of people to me and that is only the UK.
Are resources allocated to it elsewhere in the EC, in other words
where the breaches or crimes (because that is what they are) are
being perpetrated?
Mr Thomas: First of all, Mr Connarty,
the figure of 400,000 comes from research which the Office of
Fair Trading did back last year, looking at the possible number
of holidaymakers who could be affected by bogus holiday clubs,
so those not currently covered by the legislation. As I think
I mentioned the cost the OFT estimated potentially could be in
the order of £1.2 billion, which is one of the things that
has helped to accelerate and catalyse the discussions we have
been having with the Commission.
Q13 Chairman: Is that £1.2 billion
stolen from people or defrauded from people?
Mr Thomas: Potentially. You asked
about enforcement: enforcement in the UK of the existing Timeshare
Directive is carried out by trading standards officers. We are
not aware of significant problems with the timeshare industry
in the UK. There have been investigations on occasion by the insolvency
service here in the UK looking at particular problems when they
are brought to our attention, but we do work very closely with
the authorities in other Member States and what is interesting
is the enthusiasm of those other Member States where this problem
is for a revision to the directive. They recognise the damage
to their reputation as tourist destinations, want the problem
solved and have been allies with us in the discussions we have
been having with the Commission.
Q14 Mr Laxton: Looking to the future
directive and the way it impacts upon holiday club operators,
how is that going to be enforced here in the UK?
Mr Thomas: Holiday club operators
in the UK, once the revised directive has been agreed, would potentially
be investigated if there were problems by trading standards officers
here in the UK. Given the number of operators is actually quite
small we do not envisage there being a significant additional
burden for enforcement authorities here in the UK.
Q15 Mr Laxton: Obviously my experience
of the case I related to was outwith the directive; there was
not anything around at the time and therefore all agencies engaged
in this, including the police, were all virtually floundering
about what they could do, but in the end they could not obtain
any recompense for the individual concerned.
Mr Thomas: Part of the benefit,
Mr Laxton, of bringing holiday clubs and resale agents under the
terms of the directive is that it will hopefully give confidence
to consumers to confront people when they are approached. For
example, if resale agents ask for money upfront before a sale
is completed, that would be outlawed under the terms of the directive
as we seek it and it would be obvious to the consumer that they
are being approached by a bogus operator. There is clearly a responsibility
on us as a department and on the OFT and other authorities in
the UK once the directive is agreed to carry out a process of
alerting consumers to the new changes to the directive, and I
should say, Mr Connarty, that that process continues even now
with the existing directive. For example, the OFT has been doing
work at airports over the course of this summer to alert people
flying to the Canaries, for example, of the potential risks that
they might face from being approached to buy holiday club membership.
Q16 Chairman: If I can just ask a
small supplementary: alerting of people when they are going on
holiday is often not the time that people take in that kind of
information because they are trying to make sure that they have
got all the things they need for their holiday as they are leaving.
It is often in the relaxed atmosphere of being on holiday that
people are susceptible; is there going to be any arrangement to
allow English language literature to be distributed in destinations.
It seems that is what the European Community is about. If the
breaches of these regulations are happening elsewhere then that
is where you should be able to give people information, similarly
for other languages for people travelling throughout Europe for
their holidays. Has that kind of thing been discussed because
I think that would certainly put the information where it was
required, in a relaxed atmosphere, getting it from the travel
agent's staff or somewhere else?
Mr Thomas: We are not there yet
in having agreed a comprehensive communication package because
we have not completed the negotiations on the revised directive,
but I would take your point absolutely that we cannot just do
it here in the UK, we have to work with authorities in destination
countries as well and a variety of devices will be needed to communicate
messages to people about their rights under the directive and
what to look out for. That is something that we would be working
with the Office of Fair Trading on once it became clear that the
directive was going to be agreed. As I say, I think we will be
able to build on some of the successful awareness-raising work
that they do at the moment.
Q17 Mr Hands: In terms of the consultation
can you tell us a little bit about what the Association of Timeshare
Owners told you about their views about the current and the proposed
directive?
Mr Thomas: The Association of
Timeshare Owners have been very supportive of the need to take
action about the bogus people who operate holiday clubs; they
are less positive about holiday clubs being brought specifically
into the Timeshare Directive although they recognise that that
is likely to happen. Then we have been discussing some of the
specifics in terms of the different stages that we are at in the
negotiations with them at different times; it is an ongoing discussion
that we have been having with them.
Q18 Mr Hands: Just coming back, Chairman,
to pick up an earlier point you made about trading standards officers,
in my experience these are pretty few and far between. I appreciate
you said that the actual number of operators is likely to be quite
small and would not add much to the burden of local authority
trading standard officers, but has your department sought or is
it seeking to train up trading standards officers in the new directive?
Mr Thomas: There will be a process
of sensitising the people who will have to do the enforcement
activity once the new directive becomes clear; of course those
discussions will take place. We work very closely with the Trading
Standards Institute, which is the parent body for trading standards
officers, and there will be other organisations—perhaps
the Local Government Association—with whom we can work too
to help raise awareness, but I do come back to the point that
I made in answer to Mr Laxton's question, that the numbers of
companies operating in the UK are very small and we have good
relationships with those companies. We are confident, therefore,
that the revised directive will not bring substantial additional
burdens for enforcement authorities here in the UK, but obviously
it is something that we keep under very close review.
Q19 Chairman: These companies in
the UK will be selling timeshares not just in the UK. They also
may be selling them in other countries.
Mr Thomas: Sometimes, yes.
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