Memorandum by Interval International
1. With regard to measures intended to safeguard
timeshare consumers, what is the rationale for binding legislation
rather than a voluntary agreement?
Binding legislation is essential in this policy
area. Voluntary agreements only bind those companies that subscribe
to them. Self-regulation by trade associations such as the Organization
for Timeshare in Europe has been effective in ensuring that its
members adhere to applicable laws and to high ethical standards.
Most problems experienced by consumers have been caused by companies
that are not members of the trade association over which the trade
association does not have any control.
2. In this policy area, what do you consider
to be the respective roles of EC law and national law?
Timeshare transactions are usually characterised
by contracts between parties that are not based within the same
jurisdiction ie: UK residents purchasing a timeshare interest
in Spain, Portugal or Italy. It is important that regulation in
this field be harmonised across the 27 Member States to ensure
the same level of protective measures across the EU regardless
of the place of residence of the consumer and the jurisdiction
of the timeshare trader. A harmonised set of rules would simplify
matters for business and would avoid confusion amongst consumers.
The desired level of harmonisation can only be achieved through
a balanced EU Directive which, inter alia, should have
the effect of eliminating divergences in the national laws of
the Member States.
3. What has been your experience of the existing
Directive? What, in your view, are its strengths and weaknesses?
The existing Directive has gone a long way toward
providing better protection for consumers. However, problems have
continued to exist primarily due to the fact that consumers continue
to be deprived of the protection offered by the Directive as a
result of the emergence of holiday products that have been sold
outside of the legislation. The introduction by the existing Directive
of a ban on the taking of advance payments by consumers has been
punitive for the timeshare industry without adding protection
for consumers. The ban on advance payments is regarded by the
timeshare industry as disproportionately burdensome for EU timeshare
businesses in relation to the public interests that the Timeshare
Directive aimed to safeguard. Prohibitive measures that hamper
business growth should not be preserved or repeated. Where possible,
the new Directive should also serve as the basis for rectification
of errors made in the past. The existing prohibition should be
modified so as to allow the taking of advance payments for so
long as they are secured by recognised independent third parties,
such as trustees, notaries or authorised escrow agents accredited
by national law.
4. What is your view of the scope and definitions
contained in the draft Proposal (Articles 1 and 2)? Might they
be expanded, clarified or reduced? If so, how might this be achieved?
The response to this question is limited to
the scope of the proposal as it relates to exchange traders.
Exchange contracts should not come under the
scope of all of the provisions of the Directive. Some provisions
such as the Right of Withdrawal prescribed by Article 5 should
not be applicable to exchange contracts. The reason for this is
that the exchange contract is an ancillary contract. Therefore,
as provided in Article 7, the exchange contract must automatically
terminate if the consumer exercises his right to withdraw from
the main timeshare contract. In practice, the enrolment of a consumer
as a member of the programme offered by the exchange trader is
made by the timeshare trader in the context of the purchase of
a timeshare interest. If the timeshare purchase is cancelled,
the exchange should cancel automatically. The provisions of Article
7 suffice and there is no need for a separate withdrawal period
for exchange, as provided in Article 5.
5. On the basis of your own experience, what
is your assessment of the proposals relating to information provision
and advertising (Article 3 and Annexes)?
The requirement imposed on traders to provide
pre-contractual information is a valuable mechanism for the protection
of consumers. Our opinion is that the European Commission has
not correctly understood the nature of the exchange business and
the mechanics associated with the enrolment of consumers as members
of an exchange programme.
The reality is that exchange traders do not
interact with consumers when they purchase a timeshare interest.
The sale of a timeshare is performed by the timeshare trader who
subsequently enrols the consumer as a member of the exchange company.
Often, this happens three or four weeks after the purchase of
the timeshare interest by the consumer. The obligation to provide
information on exchange should, therefore, be placed on the timeshare
trader as the exchange trader is not present when the consumer
signs the timeshare contract. The exchange trader should be required
to deliver annual information on the main features of the exchange
programme but the obligation to provide such information to the
consumer should lie with the timeshare trader as part of the timeshare
sales contract.
6. How can consumers generally be best informed
by national governments or other bodies about their rights in
relation to this Directive (Article 10(1))?
Through informative campaigns initiated by the
Department of Business, Enterprise and Regulatory Reform and by
encouraging consumers to contact the trade association OTE and
read the information materials which are periodically produced
by OTE.
7. How satisfactory, from the consumer's perspective,
are the provisions on the right of withdrawal (Article 4(3) and
Article 5)?
Please see response to question 4 above. Article
5 should not apply to exchange. Automatic cancellation of an exchange
contract must take place (as provided by Article 7) if the consumer
exercises his right to withdraw from main timeshare contract.
In addition, there are important omissions in
Article 5 (2), (3) and (4). The references to Annex I and Annex
II should be expanded to also include points (a) to (k) of Annex
III and points (a) to (i) of Annex IV. The extended withdrawal
period of three months should also arise in the context of Long
Term Holiday Products and Resales.
8. One of the aims of the provisions is to
establish a more consistent regime across Member States. To what
extent is this achieved, particularly given the flexibility enshrined
within Article 1(2) which allows Member States to apply more stringent
national provisions relating to aspects of the right of withdrawal?
The proposed Article 1(2) is most unfortunate.
A consistent regime across Member States is essential and Member
States should not be given the option to apply more stringent
national provisions. The proposed Directive should not miss the
opportunity of introducing a uniform set of rules across the EU.
Article 1(2) will defeat the whole purpose of the new Directive.
The Article should be deleted as otherwise the legislation is
bound to give rise to confusion for consumers and fragmentation
of the European internal market.
9. How can consumers best be protected from
any demand to make advance payments before the end of the period
during which the consumer may exercise the right of withdrawal
(Article 6(1))?
We believe that the prohibition on the taking
of funds at point of sale was by far the most punitive, damaging,
discriminatory, and unnecessary measure introduced by European
legislators when timeshare was regulated through EU wide legislation.
These views are unanimously shared by all timeshare operators
in Europe today. With the enactment of the Timeshare Directive
in 1994, the European timeshare industry was singled out as the
only industry in Europe that would be prohibited from taking a
deposit sum at the time of execution of a sales agreement. Further,
we know of no other jurisdiction in the world that has a prohibition
on deposits as part of their timeshare regulations. Other less
punitive means have proven to provide the needed protection of
the purchaser's deposit.
There are several mechanisms that will provide
the adequate protection necessary to ensure that funds are protected.
These include escrow accounts, trustee arrangements, third party
guarantees and other arrangements providing security such as posting
of letters of credit.
Each Member State should be allowed to define
the mechanisms that are best suited to protect the advance payment
made to a third party. We at Interval International are strong
proponents of an amendment to the proposed Article 6 that would
serve the purpose of facilitating the taking of an advance payment
provided that any of the above described guarantees are in place.
10. How significant a problem for consumers
have advance payments been in the resale market (Article 6(2))?
In the past few years, a substantial number
of consumer complaints have derived from the activities of certain
unscrupulous resale companies. These companies try to extract
money from existing timeshare owners by persuading them to part
with an advance payment or administration fee for selling their
timeshare, promising them guaranteed sales for their timeshares
at inflated returns. Often, once the initial deposit is paid,
the consumer hears no more. Unlike in the case of timeshare contracts,
a ban on deposits for resales is justified.
11. What are your views on the provisions
relating to judicial, administration and out-of court redress
(Article 9 and Article 10(2))?
These provisions are adequate and correctly
drafted.
12. The proposed Directive expands the current
requirement for penalties against infringements of the legislation
(Article 11). What is your view on the level of sanctions imposed
by Member States for infringements of the current Directive, and
on the efficacy of monitoring and enforcement across the EU?
A majority of the problems experienced by consumers
are the result of very poor and often inexistent enforcement in
some of the Member States. Some Member States did not introduce
any sanctions in their legislation implementing the existing Directive.
The proposed new requirement for Member States to introduce effective,
proportionate and dissuasive sanctions will only be beneficial
for so long as the respective national bodies engage in the practice
of monitoring compliance with the legislation.
13. With particular relation to enforcement,
do you consider that the relationship between the proposed new
Directive and the provisions of the Unfair Commercial Practices
Directive is sufficiently clear?
Yes.
14. Are there any significant issues in the
timeshare market that the proposed new Directive has failed to
address?
We also would welcome views on any other aspect
of the Commission's Proposal Interval International has serious
concerns regarding the scope of the revision of the Timeshare
Directive in general and as it relates to exchange issues in particular.
The European Commission has failed to recognise the distinct nature
of the business offered by exchange traders and proposes same
legal requirements for both timeshare contracts and for exchange.
An exchange trader typically enters into multi-year
affiliation agreements with developers of timeshare resorts ("timeshare
traders"), pursuant to which the timeshare traders agree
to enrol all purchasers of timeshare interests at the applicable
resort as members of the exchange trader's network. In return,
the exchange trader provides the timeshare purchasers with the
ability to exchange their timeshare accommodation for comparable
accommodation at resorts participating in the exchange network.
It is important to differentiate exchange from
timeshare. Timeshare, unlike exchange, is characterised by substantial
financial and long term commitments. Exchange is different. Timeshare
traders generally enrol their timeshare purchasers as members
of the exchange trader at the time of the initial purchase of
the timeshare interest by the timeshare purchaser. The initial
enrolment term with the exchange trader ranges from one year to
three years. Timeshare owners are then responsible for renewing
their membership and paying related fees.
Exchange fees are quite modest: £69 per
year membership fee and, should the member wish to exchange, £99
exchange fee (for exchanges to Europe, North Africa and the Middle
East) or £114 (for exchanges to the rest of the world). Generally,
no funds are paid by the consumer at enrolment, only at time of
renewal. Responses to the Commission consultation gave no evidence
of problems related to exchange and consumer complaints about
the exchange sector are extremely low.
Interval International views as highly problematic
a proposal that has failed to recognise the ancillary nature of
the exchange service and that requires exchange contracts to comply
with the same provisions that are to apply to timeshare purchase
agreements, despite being entirely different types of contract.
While Article 7 of the proposed Directive correctly characterises
exchange as an ancillary contract, the remaining provisions that
are to apply to timeshare and long term holiday products are also
made applicable to exchange contracts.
While we are fully supportive of the introduction
of a 14 day withdrawal period applicable to timeshare purchase
contracts, we see no need for the introduction of a separate withdrawal
period applicable to exchange, as required by the proposed Article
5. Our view is that the introduction of a mandatory withdrawal
period for exchange contracts is unjustified as it is neither
supported by any evidence of consumer complaints nor does it offer
additional value to the consumer. It could even be confusing for
consumers to have to deal with two withdrawal periods (one for
the timeshare contract and one for the exchange membership contract)
that do not run concurrently, as the exchange contract is only
executed once the exchange trader receives it from the timeshare
trader, sometimes two to three weeks later.
Furthermore, in almost all cases the consumer
pays nothing to the exchange company for the initial membership—as
it is paid by the timeshare trader. Therefore, there is no reason
for a cancellation period for the exchange membership contract
since there are no consumer funds to be protected.
As the exchange membership contract is ancillary
to the timeshare purchase contract we support the provision enshrined
in the proposed Article 7 which introduces an automatic ancillary
contract cancellation provision. Accordingly, if the consumer
exercises the right to withdraw from the main timeshare contract,
the exchange membership contract would automatically be cancelled.
Article 7 achieves the objective of effectively protecting consumers
without penalising exchange businesses.
DISCLOSURE INFORMATION
ON EXCHANGE
We support a legal framework whereby consumers
are provided with adequate pre-contractual and contractual information
by timeshare traders so that they can make an informed decision
when purchasing a timeshare interest. As pointed out above, the
timeshare trader (as opposed to the exchange trader) is the party
that interacts with consumers during the timeshare purchase process.
It is, therefore, important that the information to be provided
by the timeshare trader not be limited to the attributes of the
timeshare product but also include information on exchange services.
Annex V of the proposal produced by the Commission
requires amendments and refinement to ensure that the information
elements listed therein are tailored to meet the needs of both
exchange traders and exchange consumers. Information requirements
that may be suitable for timeshare contracts are not appropriate
for the services that are typically provided by exchange traders.
Exchange businesses should be required to produce information
specific to their business. Timeshare traders should then be required
to provide to their customers the information issued by the exchange
trader. This is the best way of ensuring that consumers have an
adequate understanding of an exchange programme prior to making
a decision to purchase a timeshare interest.
INTERVAL INTERNATIONAL
Since 1976, Interval International has led the
vacation ownership industry with its hallmarks of quality and
innovation. Interval has a global network of more than 2,200 resorts
in 75 countries, and serves its developer clients and over 1.9
million members—worldwide timeshare vacation owners—through
26 offices in 17 countries. Interval provides a variety of exchange
services and year-round travel related benefits to enhance member
vacation experiences. Headquartered in Miami, Florida,and with
European headquarters in London, Interval International is an
operating business of IAC/InterActiveCorp, (NASDAQ: IACI), which
also includes such well-known brands as Ticketmaster, Ask, Lending
Tree and City Search.
4 September 2007
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