Select Committee on European Union Third Report

Chapter 9: Provision of information to the consumer

What the Commission proposes

122.  The proposed directive sets out requirements for the trader to provide the consumer with written information.

123.  Group RCI suggested that the proposal required too much non-material information for timeshare but too little for long-term holiday product contracts (pp 78-80). The OTE also wanted fuller disclosure of the precise nature of the accommodation offered by long-term holiday product companies, and of its ownership. TATOC said that the resale information provisions were excessive and that they would make worse an already difficult resale market (pp 101-106).

124.  The TCA said that the proposed measures relating to disclosure and advertising lacked sufficient precision for traders and consumers, and called for more specific requirements. It also proposed that the main elements of disclosure should be clearly stated on the front page of the purchase agreement in print no smaller than the largest print on the page, as required by the UK Timeshare Act. It also wanted more information as to the current resale value, the right to a cooling-off period, current and recent annual charges, and on the availability of bookings for points and exchange schemes where appropriate (pp 1-3).

125.  The Minister said that the new directive did not yet reflect the degree of proportionality that was needed for information requirements and that further clarity was needed (Q 120). Kevin Davis of BERR said that a balance needed to be struck between the pre-sales information requirements, where the government did not want to overburden business or consumers, and the important consideration that the information provided under the new directive becomes part of the contract (Q 120).

126.  Dr Twigg-Flesner said that "the problem we have so far is that the items of information required ... are very unstructured. You have a lot of different items of information with some overlaps but there is no clear arrangement of these various information obligations" (Q 157). He suggested that thought be given to how the information was presented, before consideration of the detailed items of information which should be included. He cited research by Professor Howells on the ability of consumers to process information and the conclusion that consumers can really only process information that is given to them in no more than seven chunks.

127.  Dr Twigg-Flesner went on to comment on the requirements about the supply of information to consumers that he felt should be introduced in the timeshare directive over and above those set out in the consumer acquis. "To us it seems important that the consumer gets information about what they are actually buying; some basic information about the property; what the property involves; what facilities are provided. Information about the price is very important. Information about key legal rights is important, including the right of withdrawal, and perhaps information about complaints procedures so that consumers can find redress where they need to if something has gone wrong". Professor Howells said that it was important to ask "What do the consumers need to know, when do they need to know it and how do they need to know it?" (Q 157).

128.  Professor Howells and Dr Twigg-Flesner expressed concern that some information would only be provided if consumers requested it, and suggested that it would be better to require traders to offer a prospectus with the required information during first negotiations with the consumer (pp 54-59). Arlene McCarthy MEP said that information should also be provided on the calculation and evolution of management fees, and on the availability of long-term holiday products (pp 92-94). A holiday exchange network said that the contractual obligation to provide information on exchange should be placed on the timeshare trader, as the exchange trader is not present when the contract is signed (pp 83-87).

Language requirement (Article 3.4)

129.  Industry submissions said that the provision that consumers may request certain key information in one of the official languages of the Community, as chosen by the consumer, would be unduly onerous. One exchange company said that, in place of its current succinct guide, it would need to produce a volume of over 3,000 pages if it were to describe in all of the Community languages the 3,300 resorts available for exchange (pp 78-81).

Long-term costs of ownership

130.  Professor Howells said that consumers might not always understand the long-term annual costs involved in timeshare ownership, or how costs were controlled. "One way around that might be to have a very clear explicit warning, in red, that this is a long-term engagement which may cost you considerable sums of money on an annual basis, and make consumers realise that" (Q 161). He also suggested that it might be useful to have an information obligation on whether or not the timeshare owner had any control in the management of the scheme or whether the management and the charging of the scheme were exclusively in the control of the organisation selling the property.

131.  TATOC also asked for a requirement to provide potential buyers with information about elected owners' committees in resorts/clubs and how to contact them, and information on any constitution or other legal agreement binding the owners and suppliers (pp 101-106).

Flexible timeshare points clubs

132.  TATOC made reference in its evidence to the growth of flexible timeshare ownership products. These can take the form of owning a period(s) at a range of resorts, or a number of holiday "points", which can be used across a wide portfolio of holiday accommodation (pp 101-106). TATOC suggested that many of the paragraphs in the proposed directive, as currently drafted, did not cover these products and that it should be revised so that it did so.

133.  Dr Twigg-Flesner noted that the definition of "timeshare" includes "one or more accommodations" and that therefore multiple resort deals were included, together with the information obligations for each of the properties. "The difficulty arises when it is never clear which kind of properties might be included in these multiple resort arrangements, if there are properties that might be replaced by other properties and so on, and then it might be very difficult to be able to provide this information because they might not know which properties will eventually be covered by the agreement. To the extent that they say, 'You can have a property in these 10 resorts, these are the types of properties we have,' they would have to provide information on each of those in order to comply with the obligations" (Q 156). He saw a risk in overburdening consumers with a lot of information which they might not understand or need at that point.

134.  Professor Howells said that many multiple resort deals had some of the characteristics of long-term holiday products. "I would be worried about: Do I know what my points are worth? How do I know what they will get me? How can those points not be skewed in the future to change my rights, so that I might need five points this year to get a villa with a swimming pool but seven points next year or whatever? Something like the obligation at Annex III(b)—which says 'to state the exact nature of the right which is subject under the contract'—might be usefully included in timeshare contracts which were based on a points basis, to let me understand what rights I have" (Q 156).

Conclusions and Recommendations

135.  We conclude that the information requirements need to be reviewed to ensure that they address key consumer needs and are proportionate. (paras 122-128)

136.  We recommend that a clear hierarchy of information provisions be established, setting out the relative importance to the consumer of each type of information and based on objective and independent research into consumer understanding. We suggest that one way forward would be for the Council and Parliament to agree on the overall information objectives, which should then be defined more closely through the comitology procedure[21]. (paras 126-127)

137.  We recommend that, in the case of timeshare, the information requirements give fuller information about the longer-term costs associated with ownership, rights of withdrawal and owner representation. (paras 130-131)

138.  We recommend that, in the case of long-term holiday clubs, more information should be provided about the precise nature of the accommodation offered and of its ownership, and the identity of the company or companies that will be providing the services offered. (para 125)

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21   The "comitology" procedure allows minor "implementing decisions" to be taken by the Commission, with the full involvement of the Member States, within the framework of broader legislation. It is governed by Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred upon the Commission. (L184, 17,7,1999, p 23-26)  Back