Chapter 7: Advance payments during the
withdrawal period
92. The proposed new directive would continue
the ban in the 1994 Directive on the taking of a deposit for a
timeshare during the cooling-off period, and extend it to holiday
clubs (Article 6). The proposal also prohibits demands for payments
to be made to third parties, a practice that has developed in
some Member States and which in effect circumvents the original
ban.
93. The OTE told us that "we know of no
other industry that is penalised with a cooling off period and
a ban on deposits and a significant number of large hospitality
brands, principally US based, will not operate in the EU under
such punitive restrictions". The OTE also said that "singling
out timeshare without good reason puts the industry in a less
competitive position compared with other tourism services and
products" (pp 13-16). It proposed instead the use of independent
third parties for deposit payments to encourage the growth of
the industry (pp 13-16).
94. Shakespeare Classic Line argued that consumers
should expect to pay a deposit for timeshare (pp 100-101). Interval
International, a holiday exchange network, proposed that advance
payments should be permitted for timeshare, provided that these
payments were secured by independent third parties accredited
by national law (pp 83-87).
95. The Minister rejected the idea of payments
to third parties. He argued that the 1994 Directive had proved
successful in this area and that a third party scheme would add
an unnecessary level of bureaucracy for consumers and the industry
(Q 100).
96. Consumer and enforcement bodies and TATOC
welcomed the Proposal to tighten the ban on advance payments during
the cooling-off period. The OFT noted that taking deposits "puts
consumers under a psychological pressure to continue with the
contract" (Q 72), a point supported by the TCA which
said that "the prospect of failing to recover a deposit,
or simply the complex mechanism that traders would place in the
way of consumers trying to recover their deposit on a legitimate
cancellation, is a strong incentive on consumers to continue with
an agreement that they really want to terminate" (pp 1-3).
97. The Minister also told us that a ban on advance
payments was justified "because of the particular circumstances
in which these products are usually sold". He said that consumers
were normally overseas and away from sources of help and advice
such as the Citizens Advice Bureau. They were therefore potentially
susceptible to high-pressure sales techniques (Q 100).
Conclusion and Recommendation
98. We conclude that the removal of the ban
on deposits during the cooling-off period would be likely to lead
to a recurrence of the problems that plagued the timeshare industry
prior to the 1994 Directive. We therefore recommend the continuation
of the ban on the taking of a deposit for a timeshare during the
cooling-off period and its extension to holiday clubs, and we
support the ban on demands for payments to be made to third parties,
as proposed by the Commission. (paras 95-97)
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