Select Committee on European Union Third Report

Chapter 14: Summary of Conclusions and Recommendations

Chapter 4: Regulatory Issues

192.  We believe that the Commission has set out a good case for a new broader timeshare directive, and that existing horizontal EU consumer protection legislation including the Unfair Commercial Practices Directive is insufficient to deal with the specific problems associated with the timeshare and long-term holiday club sectors. (para 48)

193.  We conclude that, while timeshare and holiday clubs have different characteristics, they have many similar features and are marketed in a similar way, in similar situations and often to similar target groups. Both exhibit characteristics which require the same type of consumer protection measures, and we see no major difficulties in regulating both within the one directive as proposed by the Commission. (para 49)

194.  We believe that it would have been preferable for the Commission to have proposed a new timeshare directive together with other legislative proposals following from the review of the consumer acquis, but we recognise that changes to the Timeshare Directive are overdue and we urge the Council and the European Parliament to seek early agreement. (para 50)

195.  We recommend that the Commission, in considering any new proposal in the field of consumer contract law, bear in mind the need to keep consequent amendments to the new timeshare directive to a minimum. (para 51)

196.  We recommend that the Commission have regard to the issues arising in the timeshare and long-term holiday product markets during its review of the various elements of the consumer acquis. (para 52)

Chapter 5: Justification for Regulation

197.  We are disappointed that a substantial part of the industry remains outside the self-regulatory system. We urge companies in the timeshare sector to do more to raise standards. We regretfully conclude that there appears to be no reasonable prospect of self-regulation in the long-term holiday club sector at present. (para 64)

198.  We recognise the motivation of those who suggest that compulsory membership of trade associations should be considered further but we think it unlikely that this would be practical and effective. We consider it more appropriate for the Commission to pursue the concept of licensing as we recommend in paragraph 160. (para 65)

199.  We recommend that traders should be obliged, rather than encouraged, to inform consumers of their codes of conduct (Article 10.1). (para 66)

200.  We urge trade associations in these sectors to review and strengthen their codes of practice in relation to unfair, misleading and aggressive sales practices, and to increase compliance. (para 67)

201.  We conclude that national legislation cannot adequately deal with the problems associated with the timeshare market and that EU-level legislation is therefore appropriate. Inadequate enforcement of the current framework, however, does cause us some concerns and we have made some recommendations concerning future enforcement in Chapter 11. (para 68)

Chapter 6: The Right of Withdrawal and the Cooling-Off Period

202.  The introduction of rights of withdrawal and a cooling-off period have benefited purchasers of timeshares and the industry, and these rights should be maintained for timeshare and extended to cover long-term holiday clubs. (para 84)

203.  Evidence that suggests that most consumers who cancel do so early in the cooling-off period gives only a partial picture. There may be many other consumers who return from their holiday and, on further consideration and perhaps advice, wish that they had cancelled but find that it is too late to do so. On this basis, we do not think that 14 days is an adequate period for reflection and obtaining independent advice and we therefore recommend that the cooling-off period be 21 days (Article 5.1). (para 85)

204.  We recognise that as a consequence of a longer cooling-off period more consumers may cancel purchases of timeshares and long-term holiday products but we suggest that, if this occurs to a significant extent, the problems lie with the products and the way in which they are sold. (para 86)

205.  We recommend that in setting cooling off periods, the definition of "day" as a working or calendar day should be clarified. (para 87)

206.  We conclude that there is scope for confusion, in the proposal that the cooling-off period be extended by one day, where the final day is a public holiday unless there is greater clarity for both parties about which public holidays apply. We recommend that the cooling-off period be extended by one day where the final day is a public holiday in the Member State of either of the contracting parties (Article 5.2). (para 88)

207.  We recommend that the right of withdrawal should not expire after three months in the absence of the information provisions required in Annex I (Article 5.3). (para 89)

208.  We recommend that information for consumers about rights of withdrawal be provided in a prominent and clear manner in the contract and in promotional material. (para 90)

209.  We recommend the deletion of the proposal that consumers reimburse expenses to traders where they cancel during the withdrawal period (Article 5.5). (para 91)

Chapter 7: Advance payments during the withdrawal period

210.  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. (para 98)

Chapter 8: Resale and exchange

211.  We support the proposed ban on requests for advance fees for resale. (para 117)

212.  We recommend that the objectives of the cooling-off provisions in relation to resale be clarified. We are particularly concerned that treating resales by timeshare traders and by independent intermediaries on a different basis could be confusing for consumers and could open up a loophole whereby rogue traders collaborate with, or pose as, intermediaries. (para 118)

213.  We believe that clarification is needed too in relation to the cancellation of exchange contracts (Articles 5 and 7). In that vein, we agree that consumers who pay to join an exchange scheme should be entitled to a refund of their fees if reasonable and timely requests for exchanges cannot be met and recommend that a right on these lines be added to the directive. (para 119)

214.  We recommend that the definition of an exchange be amended to clarify that exchange allows consumers to use the timeshare rights of others, in exchange for others using their timeshare rights, without modification of the rights of the owners. (para 120)

215.  We support the suggestion by the Minister that the information requirements should also include details of restrictions on access to particular exchanges and that exchange operators should be obliged to inform the consumer about any additional charges for particular exchanges. (para 121)

Chapter 9: Provision of information to the consumer

216.  We conclude that the information requirements need to be reviewed to ensure that they address key consumer needs and are proportionate. (para 135)

217.  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[29] procedure. (para 136)

218.  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. (para 137)

219.  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 138)

Chapter 10: Raising public awareness

220.  Raising public awareness is not a substitute for adequate consumer protection. However, potential timeshare consumers do need to be better informed about their rights and about potential "scams", and to be much more wary when entering into major purchases of the nature discussed in this Report, particularly when doing so in another jurisdiction and in the absence of professional advice. (para 143)

221.  We believe that the UK has made a good start in this area and commend the activities to date of the Office of Fair Trading. We consider, however, that a requirement on Member States merely to inform the public of the national law transposing the directive is not sufficient. We recommend that the Commission work with the Member States to draw up a strategy to improve consumer awareness of "scams", of aggressive and misleading selling practices in these sectors and of their rights in relation to withdrawal from the contract, focusing on key tourist destinations and encouraging regional and local authorities, local tourism associations, chambers of commerce and enforcement bodies to take part. (para 144)

Chapter 11: Enforcement and Sanctions

222.  We agree that the establishment of appropriate sanctions is properly the responsibility of the Member States, but recommend that the Government and the Commission act speedily where there is evidence that implementing measures are not effective, proportionate and dissuasive (Article 11). (para 157)

223.  We conclude that licensing could have merits. Although it may impose costs, these should be assessed in relation to the level of consumer detriment identified by the OFT. We recommend that the Commission study the costs and benefits of a licensing scheme for enforcement and redress. (para 158)

224.  We agree that although enforcement is primarily a matter for the Member States where problems occur, there is a Europe-wide dimension and we recommend that further consideration be given to the idea of monitoring by the European Commission with a view to informing the actions taken by Member States to enforce the legislation. (para 159)

225.  We recommend that the Commission review and report on progress in the enforcement of the directive and on the adequacy of sanctions by 2010. (para 160)

226.  We recommend that the Commission review the provisions of the Injunctions Directive in relation to the powers to act against individuals as well as traders. (para 161)

Chapter 12: Redress

227.  We conclude that the provisions on individual redress in the directive, although an advance on the 1994 Directive, are insufficiently robust. (para 167)

228.  We recommend that the proposed directive be amended to entitle consumers to require that, in the first instance, an out-of-court settlement be sought through an independent arbitration or mediation scheme, without prejudice to the consumer's right of judicial action. (para 168)

229.  We recommend that the Commission report to the Council and Parliament in 2010 on progress in the development of out-of-court redress schemes in these sectors. (para 169)

Chapter 13: Other Issues

230.  We welcome the proposed inclusion of non-fixed properties such as canal boats, caravans and cruise ships within the directive (Article 2.1(a)). (para 184)

231.  We support the proposed reduction of the definition of a timeshare from 36 to 12 months (Article 2.1(a)). However, we note that some Member States set no minimum period for a timeshare and, provided that the removal of the minimum period does not lead to the application of the new timeshare directive to holidays more properly covered by the Package Travel Directive, we see no reason for any minimum period. (para 185)

232.  We recommend that, if a timeshare is to be defined as one of 12 months or more, the new directive should include an anti-avoidance provision to deal with contracts purporting to be of a shorter duration. (para 186)

233.  We recommend that the definition of holiday clubs (Article 2(1) (b)) be amended to exclude arrangements not involving accommodation and those which are provided as an incidental benefit to their members rather than as their primary commercial purpose. (para 187)

234.  We recommend that multi-annual hotel reservations be explicitly excluded from the scope of the new directive. (para 188)

235.  We agree that fair and balanced rights of termination and transfer of ownership must be central to the contract and recommend that the proposal be amended to provide them. (para 189)

236.  We recommend that the Commission consider further the issues of timeshare owners' rights and representation and that, meanwhile, the industry itself address the need for improvements in these areas. (para 190)

237.  We support the proposed review of the new directive five years after it comes into force (Article 13), but recommend earlier reviews in relation to enforcement and redress as discussed previously. (para 191)

---

29   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