3 Consumer protection: sale of timeshare
and other long-term holiday products
(28701)
10686/07
COM(07) 303
+ ADD 1
+ ADD 2
| Draft Directive on the protection of consumers in respect of certain aspects of timeshare, long-term holiday products, resale and exchange
Commission staff working document: summary of impact assessment
Commission staff working document: impact assessment
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| Legal base | Article 95 EC; co-decision; QMV
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| Document originated | 7 June 2007
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| Deposited in Parliament | 14 June 2007
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| Department | Dept for Business, Enterprise & Regulatory Reform
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| Basis of consideration | Minister's letter of 16 October 2007 and oral evidence of 17 October 2007
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| Previous Committee Report | HC 41-xxviii (2006-07), para 3 (4 July 2007)
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| To be discussed in Council | 22-23 November 2007
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Previous scrutiny of the proposal
3.1 In July, we considered this proposal for a Directive to replace
the Timeshare Directive of 1994.[16]
This chapter reports on our further scrutiny of the proposal.
3.2 The 1994 Directive[17]
applies to contracts for the purchase of the right to use one
or more "immovable properties" for one week or more
at a specified time of year for at least three years in return
for a payment. The Directive requires Member States to include
in their national legislation provision:
- requiring the vendor to provide
prospective purchasers with specified information (about, for
example, the arrangements for maintenance and repairs);
- giving the purchaser the right to withdraw from
the contract within ten days of signature;
- prohibiting any advance payment by the purchaser
during the withdrawal period; and
- on the consequences of non-compliance with the
Directive.
3.3 After consultations with Member States and interested
bodies, the Commission now proposes the repeal of the 1994 Directive
and its replacement by a new Directive which would:
- simplify, clarify and update
the existing Community law on timeshare contracts; and
- give the same protection to consumers of similar
products which are not covered by the existing Timeshare Directive.
3.4 The Commission says that these changes are necessary
because unscrupulous vendors have circumvented the 1994 Directive
by, for example, making contracts for 35 months or for stays of
less than a week. Moreover, the abuses which led to the adoption
of the Timeshare Directive are being practised on products similar
to timeshares but not covered by the Directive. The Commission
proposes, therefore, that the protection provided for timeshares
in immovable property should apply equally to:
- timeshares in canal boats,
caravans and cruise ships;
- "timeshare resale" —contracts
with agents who, for a payment in advance, help consumers either
to sell their time share or to buy one privately;
- "timeshare exchange schemes" through
which, for a payment in advance to the operator of the scheme,
a timeshare owner exchanges his or her entitlement to a week in
timeshare accommodation for a week in a timeshare owned by another
member of the exchange scheme in a different resort or property;
and
- "long-term holiday products" (holiday
clubs) — contracts under which the club operator, in return
for a payment in advance and an annual renewal fee, promises to
give the consumer access to holiday accommodation and other facilities,
with or without travel, at substantially discounted prices.
3.5 The main provisions of the proposed Directive
are as follows:
- "timeshare" is defined
as a contract with a duration of more than one year by which a
consumer acquires the right, for a consideration, to use accommodation
for more than one period of occupation;
- "long-term holiday product" is defined
as a contract of more than one year by which a consumer acquires
the right, for a consideration, to obtain discounts (and other
benefits) on accommodation, with or without travel and other services;
- the trader must provide the consumer with the
product information specified in the annexes to the draft Directive;
- Member States should ensure that the contract
is written in a Community language of the consumer's choice;
- Member States should ensure that the consumer
has the right, without giving reasons, to withdraw from the contract
within 14 days of signature or the supply of all the information
specified in the relevant annex, whichever is the longer;
- Member States should prohibit any payment or
the giving of any other consideration to the trader during the
period allowed for withdrawal from the contract;
- Member States should ensure that there are adequate
and effective means to secure compliance with the terms of the
Directive in the interests of consumers and should encourage the
establishment of proper arrangements for out-of-court settlement
of consumer complaints; and
- Member States should provide effective, proportionate
and dissuasive sanctions on traders who do not comply with national
law to give effect to the Directive.
3.6 The then Minister for Trade, Investment and Foreign
Affairs at the Department of Trade and Industry (Mr Ian McCartney)
told us in June that the Government welcomes the draft Directive.
It includes provisions which respond to the Government's concerns
about resale and exchange schemes and holiday clubs. There has
been a huge increase in sales of holiday club membership since
1994. According to the Office of Fair Trading (OFT), club membership
is oversold, using the unscrupulous techniques which had been
used to sell timeshares before the 1994 Directive came into effect.
The application of the provisions of the draft Directive to holiday
clubs should provide an effective means of exposing and discouraging
the worst malpractice in the sector and promote better practice
and the provision of adequate information to consumers.
3.7 The Department's detailed Impact Assessment of
the draft Directive concluded that the additional costs for operators
would be short term and would be far outweighed by the benefits
to consumers.
3.8 We were in no doubt about the beneficial effects
of the 1994 Directive. We understood the case for updating it
and extending protection to similar holiday products and to holiday
clubs, in particular. The negotiations on the draft Directive
were only just beginning. Accordingly, we invited the Minister
to discuss them with us in October.
The Minister's letter of 16 October 2007 and his
oral evidence the next day
3.9 In preparation for his oral evidence to us,
the Parliamentary Under-Secretary of State at the Department for
Business, Enterprise and Regulatory Reform (Mr Gareth Thomas)
wrote to us on 16 October to tell us about the progress of the
negotiations on the draft Directive and the developments in the
Government's thinking about the proposal. He appeared before us
on 17 October to enlarge on the information in his letter and
to answer our questions. The uncorrected transcript of his oral
evidence is accessible on our web-site.[18]
3.10 The Minister told us that there is general support
for the draft Directive among Member States. So discussion in
the Council Working Group has concentrated on the details of the
proposal.
3.11 The Government's main concerns are about:
- the precise definition of the
activities to be covered by the Directive — for example,
the Government would prefer "accommodation" in Article
2 to be qualified as "overnight" or "living"
accommodation;
- the breadth of the provisions on exchange schemes
— the Government is not persuaded that it is necessary or
proportionate to require either a cooling off period or a ban
on advanced payments (this is because the vast majority of timeshare
owners who join an exchange scheme do so at the time they purchase
the timeshare, which would be subject to the 14-day cooling off
period; and the consumer has to pay little or — often —
nothing for membership of an exchange scheme); and
- the Government considers that a cooling off period
is not required for resale contracts. This is because there is
no financial risk for the consumer since no payment is due to
the agent until the sale has been completed or the contract is
otherwise terminated.
3.12 The Minister also told us about the further
consultations his officials have had with organisations representing
timeshare owners (Q17). They broadly support the Government's
approach to the draft Directive. The Government will continue
to take account of their views in the negotiations.
3.13 The Minister also underlined the need for EC
legislation to protect consumers from unscrupulous holiday clubs
(QQ 10, 14 and 20). He explained why, in his view, the 1994 Directive
has been of benefit to many people and why the proposed extension
of protection to other holiday products is justified (QQ 2-5).
Conclusion
3.14 We are grateful to the Minister for his written
and oral evidence. Having reflected on it, we wish to emphasise
our view that the Timeshare Directive 1994 and this proposal for
legislation to update and extend it are excellent examples of
the practical benefits which have been and can be obtained from
cooperation between the Member States and between them and the
European institutions. We warmly welcome the draft Directive and
have no further questions to put to the Minister. We are, therefore,
now content to clear the document from scrutiny.
16 See HC 41-xxviii (2006-07), para 3 (4 July 2007). Back
17
Directive 94/47/EC OJ No. L 280, 29.10.94, p.83. Back
18
To be published as HC 1080-i. Back
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