Memorandum by The Association of Timeshare
Owners Committees
INTRODUCTION
Established in 1989, the Association of Timeshare
Owners Committees (TATOC) is a consumer-based association of timeshare
owners representatives elected by timeshare owners at their resorts/clubs.
TATOC's objective is to support timeshare consumers by providing
resources, assistance and guidance and to liaise with government
agencies on their behalf.
At present we represent approximately 250,000
owners from 72 resorts and Clubs in the UK, Spain, Canary Islands,
Portugal, Madeira, Malta and Austria. From I st January 2008 TATOC
will also take over consumer complaints and representation for
UK citizens on all timeshare matters where the resort/company
are not members of the Organisaton for Timeshare in Europe (OTE),
and to liaise with OTE where they are.
Timeshare is a successful holiday product. A
recent independent survey revealed that 96% of owners rate timeshare
as better than any other self-catering holiday and 97% of owners
rate timeshare as better than staying in a hotel. It is of considerable
concern to TATOC that, neither the existing, nor the proposed
Directives, give due recognition to the existing 1.45 million
timeshare owning families in Europe who are already consumers.
It is essential to existing owners that the timeshare industry
has long-term security, stability and prosperity. All timeshare
owners need the principle features of their investment to be successful,
and these requirements include a successful timeshare marketplace,
an effective resale facility, and a fully satisfactory exchange
facility. Whilst the main focus of the proposed Directive is on
potential consumers at the point of sale, the potential impact
on the existing 1.45 million timeshare owning families must also
be considered.
TATOC welcomes the opportunity to present evidence
to the House of Lords regarding the EU Commission's proposed replacement
of the Timeshare directive (proposal COM(2007) 303 final). Our
comments on the numbered questions in the Call For Evidence are
listed below. Our additional comments/concerns on detailed areas
of the proposed Directive are included as an appendix.
1. The rationale for bidding legislation or
voluntary agreement?
The 1994 Timeshare Directive (94/47/EC) has
been highly effective in providing protection for consumers purchasing
timeshare products. In TATOC's response to the European Commission's
Consultation Paper, we made it clear that TATOC did not support
a combined legislation that brought non-timeshare products like
Discount Holiday Clubs into the same legislation as timeshare.
We still hold this view very strongly, but recognise that momentum
and support for the combined legislation is now so great that
we must take a pragmatic view, and make a positive and practical
contribution to the proposed Directive.
Consumers in the recently emerging non-timeshare
products need the same degree of protection as afforded to timeshare
owners by the original Timeshare Directive. It must also be recognised
that the Code of Conduct and Dispute Resolution Scheme introduced
by OTE has had a major impact on improving standards and protection
for consumers within those timeshare companies who are OTE members
or subscribe to the Code of Conduct. However, not all companies
are OTE members or subscribe to the Code of Conduct.
TATOC believes that a combination of legislation
and a voluntary code-of-practice with a well recognised industry
"badge of quality" will provide the maximum protection
for consumers. The new Directive must provide adequate protection
to consumers of the newly emerging non-timeshare products, without
having a detrimental effect on the legitimate timeshare product
and it's owners.
2. Respective roles of EC law and national
law?
TATOC understands that it is the role of an
EU Directive to establish a minimum standard of consumer protection
to apply across the EC. We beieve tha this is especially important
in holiday products which, by their very nature, are often cross-border.
It is the responsibility of Member States to produce national
legislation to transpose the EU Directives and to provide effective
enforcement procedures and sanctions.
3. Strengths and weaknesses of the existing
Directive
The existing Directive has been very effective
in providing consumer protection on the sale of timeshare products.
Evidence of this is seen in the dramatic decrease in timeshare
complaints and the drive by businesses to develop products not
covered by the Directive. The weakness of the existing Directive
is that its scope is no longer sufficient to provide protection
for newly emerging holiday products incorrectly described in
the proposed Directive as "similar to it" (opening
page of the Directive). It must be recognised that legislation
alone can never provide protection for consumers without rigorous
enforcement by Member States. This failure to enforce existing
law has been the major weakness in dealing with the illegal practices
of unscrupulous businesses operating bogus timeshare resale companies.
More than anything else, it is this lack of enforcement that has
caused a loss of consumer confidence in the timeshare product.
4. Scope and definitions of the draft Proposal
(Articles 1 and 2)
It is made clear throughout the proposed Directive
and associated papers that the perceived problems in marketing
are not related to the genuine timeshare product. It remains TATOC's
concern that bringing non-timeshare products within the scope
of a Directive bearing the name of "timeshare" will
prove detrimental to the genuine timeshare product and its owners.
It is our view that the proposed Directive takes
too "heavyweight" an approach in addressing timeshare
exchange facilities, or indeed that any real or quantified problems
exist in this area. We believe the requirements of the Directive
on timeshare exchange to be unnecessary and unworkable. Please
see appendix paragraph 4 for further comment.
On the matter of resale companies, the vast
majority of problems are a direct result of the illegal activities
of unscrupulous companies and the only real method of removing
this problem is the rigorous enforcement of existing laws by Member
States. Without this action there will be no additional benefit
from any provision in the new Directive to address resale.
TATOC fully recognises and supports the need
to introduce legislation to provide consumer protection on the
new long-term holiday products that lie outside the definition
of timeshare within the current Directive.
The definition of "timeshare" within
Article 2 (la) is inadequate to correctly identify the legitimate
timeshare product, and to differentiate it from non-timeshare
products where the consumers benefits are not guaranteed
against any identifiable assets or right of use of holiday accommodation
directly owned by the consumers or held in trust. See appendix
paragraph 1.
5. Information provision and advertising (Article
3 and Annexes)
For ownership at fixed timeshare resorts, TATOC
supports the extended disclosure information detailed in Annex
1 and 2. However, we are most concerned about the opportunity
described within Article 5 paragraph 5 for marketing companies
to have the opportunity to levy and enforce a charge for cancellation
of the contract during the cooling-off period. Whilst recognising
that the existing Timeshare Directive contains a similar provision,
this does provide an opportunity for unscrupulous companies to
make considerable and unjustified profits from members who withdraw
from their contract. We press very strongly for this opportunity
to be removed.
We are concerned that the requirements of Annex
1 would be wholly impractical for flexible or points-based timeshare
companies where the portfolio of products can be very extensive.
It is quite impracticable for a marketing company to provide,
or for a consumer to absorb, such quantity of detail in such cases.
For example, it is not uncommon for there to be ten or more resorts
in a single portfolio and provision for this must be built into
the proposed Directive. See appendix paragraph 7.
We are concerned that the requirements of Annex
3 (long-term holiday products) are insufficient to provide adequate
protection to consumers. The dangers of such products are not
adequately revealed by the requirements of the Directive, while
the sheer volume of information may give a purchaser a false sense
of security. Marketing companies should be required to provide
full details of the product, and a full description of the assets
whether real, rented or contractual upon which the product is
dependent. See Appendix paragraph 2.
There is additional information TATOC feels
would be highly beneficial to purchasers of Timeshare and LTHPs
that should be included in Annexes 1 and 3. This is described
in Appendix paragraph 3.
TATOC supports the focus of the proposed Directive
onto resale companies, but is concerned that Annex 4 introduces
considerable confusion and anomalies that must be resolved. See
appendix paragraph 5
6. How can consumers generally be best informed
about their rights in relation to this directive?
There are two aspects to this question. First,
there is a need to bring information about the introduction and
purpose of any new Directive to the attention of the general public.
TATOC would support an intensive media campaign by Member States,
and would welcome the opportunity to work with the OFT, DTI or
any other government agency on this matter.
Secondly, there is an essential need for potential
timeshare and LTHP purchasers to be particularly aware of this
Directive, together with any other relevant Directives such as
the Unfair Commercial Practices Directive, and the national legislation
that implements them. TATOC recommends that the disclosure information.
(Article 3 (2) and Annex 1 and 3) be extended to include a legislative
summary making reference to relevant Directives and national legislation.
7. How satisfactory for consumers are provisions
for withdrawal (Article 4(3) and Article 5)?
The right of withdrawal, together with a ban
on deposits, have been the two fundamental aspects of the existing
Timeshare Directive that introduced much needed consumer protection
to timeshare purchases. It is essential that the disclosure information
referred to in Annex 1 (m) contains the full and detailed information
as described in article 5 of the proposed Directive.
The right of withdrawal hinges on pre-contractual
information being provided in writing (Article3) and a written
notice of withdrawal (Article 5) being "dispatched"
before the deadline expires.
There are many examples where disputes have
resulted from disagreement about withdrawal notices being sent
or the date on which this was done. To limit the possibility for
such disputes, the pre-contractual information should also include
guidance on any requirements within the contract or national law
for a consumer to demonstrate the sending of a withdrawal notice.
8. To what extent does the Directive achieve
a more consistent regime across Member States?
TATOC is in full support of a harmonised approach
across Europe, especially because the nature of timeshare is one
of a cross-border business. A harmonised cooling-off period of
14 days is a specific example (Articles). We are concerned that
confusion could result, both to marketing companies and to consumers,
if member states substantially modify the requirements of the
new Directive within their national legislation. Article 1(2)
limits the provision for more stringent requirements to the right
of withdrawal, which should minimise the danger, but even so it
is TATOC's view that a common application of the directive in
Member States will result in less confusion for consumers.
9. How can consumers be best protected from
demands for advance payments?
As indicated in 7 above, the ban on deposits
has been a fundamental element of the consumer protection introduced
by the existing Timeshare Directive. TATOC strongly supports the
ban on deposits to continue. However, a number of member states
currently allow a process of deposit taking by independent third
parties, a procedure which Article 6 (1) and (2) prohibits. This
may have a detrimental effect on timeshare sales within these
countries. Before closing the door on this procedure, TATOC would
welcome a study to establish whether a third-party procedure can
be identified and regulated that would provide the opportunity
for third party deposits without weakening the consumers undisputed
right to a return of monies on withdrawal from the contract under
the provisions of the Directive.
10. How significant a problem for consumers
have advance payments been in the resale market?
This has been the most significant consumer
problem in the area of resales. There have been a large number
of companies contacting timeshare owners and requesting advance
payments for a variety of reasons, many claiming to have a buyer
already waiting and willing to pay an attractive but inflated
price. The vast majority of consumers never achieved a sale and
never saw their money again. These illegal practices will not
be prevented by any provisions within a new Directive. The
answer to this problem lies in identification and rapid, rigorous
enforcement of existing laws.
The new Directive (Article 6(2) provides that
no payment, guarantee, reservation, etc may be taken by a resale
company (or third party) prior to completion of the sale. However,
the timeshare industry and its consumers needs to have an active,
reputable resale marketplace in operation for the benefit of consumers
who may no longer be able to utilise, or perhaps not afford, the
ongoing cost of their investment. A total ban on all payments
prior to completion of a sale is too simplistic an approach, and
will result in further stagnation of the resale market and a resulting
disadvantage to consumers. Reputable resale agents incur costs
in advertising timeshare properties for owners. TATOC would welcome
a study to consider whether Article 6(2) could be safely revised
to allow for a small, reasonable and detailed charge to be made
by registered companies.
Please see appendix paragraph 5 for further
recommendations on resale.
11. View on sanctions imposed by member states
for infringement of the current Directive
The provisions of the Directive appear satisfactory,
but TATOC's concern again remains one of there being an adequate
commitment to investigation and enforcement.
12. View on the level of sanctions imposed
by Member States in enforcing the current Directive
We do not have sufficient information available
to comment on the number or effectiveness of actions brought for
infringement of the current Directive. However, the overwhelming
impression is that there has been few actions brought against
offenders under the current legislation. This may be testament
to the effectiveness of the Directive, but may also be due to
the limited scope of the directive and the moves to develop products
that lie outside of its protection.
The phraseology of the Directive in Article
11 (2) is encouraging, ie that sanctions should be "effective,
proportionate and dissuasive". If possible we would add "timely",
"punitive" and "rigorously enforced" to this
statement.
13. Relationship between the proposed Directive
and the Unfair Commercial Practices Directive
The expanded scope of the new Directive will
introduce much needed consumer protection, much of which lies
outside of the core timeshare product itself. It is TATOC's view
that this extended scope will be well complimented by the provisions
of the Unfair Commercial Practices Directive in further regulating
the activities of companies operating within the provisions of
the new Directive
14. Significant issues in the timeshare market
that the proposed Directive has failed to address
Please see appendix for TATOC concerns on:
— Areas where the proposal will not
provide adequate protection or may have missed its intended "target".
— Areas where there would be serious
practical difficulty in implementation.
ADDITIONAL COMMENTS
ON DETAILED
ASPECTS OF
THE PROPOSED
DIRECTIVE
1. Definition of timeshare
The definition of timeshare in Article 1 (a)
of the proposed Directive does not capture the essential factor
differentiating timeshare from other Long Term Holiday Products
(LTHP). Timeshare ownership is based on clearly defined holiday
properties for which owners have a long-term right of use that
is directly owned by them or held in trust on their behalf If
the Directive is to incorporate different requirements for timeshare
and LTHPs the distinction between them must be more clearly defined.
We would propose the definition of timeshare be extended to include
a phrase:
the right to use one or more clearly defined
accommodations where the long-term right of use belongs to an
individual owner or group of owners, or is held in trust on their
behalf.
In addition, the statement in paragraph 1 of
the first page of the proposed Directive that "new products
similar to (timeshare) have appeared on the market" is incorrect
and misleading. The newly emerging long-term holiday products
designed to circumvent the 1994 Timeshare Directive are nothing
what-so-ever like timeshare except, perhaps, that the aggressive
sales techniques that gave timeshare it's original bad name have
reappeared on these new products. The statement that the two products
are similar is detrimental to the image and perception of timeshare
and should be removed.
2. Disclosure information for LTHPs
Annex 3 should require more detailed information
for LTHPs to clearly indicate to buyers the precise details of
the accommodation and any other benefit being offered, including
it's ownership and any security of ownership or right of use by
the company, for the services being offered over the time period.
The requirements placed on timeshare products in Annex 1 are far
more extensive and demanding, yet it is consumer protection in
LTHPs that has been a principle driver behind the new Directive.
The requirements of Annex 3 are inadequate to substantially improve
consumer information or to provide adequate protection for purchasers
of LTHPs.
3. Additional information required in
Annex 1 and 3
There are many reasons why an owner may no longer
wish, or be able to, continue to enjoy the benefits of their holiday
product. It is TATOC's view that information should be included
in Annexes 1 and 3 to detail the procedures, requirements, limitations
and costs of transferring ownership, and of resigning from the
ownership should this prove necessary.
The detailed operation, rules and costs applying
to a particular timeshare resort or LTHP can change from time
to time as described within the Constitution or rules governing
the detailed operation of the ownership. It should be made clear
to potential consumers that the information presented in Annex
l and Annex 3 are only applicable at the time of signing the contract,
and may change thereafter. The rules governing such changes should
be described.
TATOC also believes it would be helpful to potential
consumers if Annex 1 indicated whether a particular timeshare
resort or club had an elected Owners' Committee and how to contact
this organisaton.
4. Exchange facilities
TATOC is concerned that the requirements of
Annex 5 demonstrate a lack of understanding of how timeshare exchange
facilities operate and would be impractical and unworkable. For
example, the largest exchange company RCI, on which the majority
of timeshare owners depend for their exchange facilities, has
access to more than 3,000 resorts. The requirements of Annex 5
(c & e) in many cases do not apply or would be impractical
to provide for 3,000 properties. Paragraphs i to m do not generally
appear applicable to exchange companies or the timeshare exchange
environment.
Other exchange companies, for example Dial an
Exchange in the UK, offer exchange facilities to owners who "bank"
their ownership in exchange for others where the exchange company
has no direct contract or relationship with the particular resort.
In addition, the right of withdrawal (Article
5) and the advance payments (Article 6) do not apply well to exchange
companies because of the essentially different service such companies
provide compared to the actual sale or resale of holiday products.
It is TATOC's view that a complete revision of Annex 5 and how
exchange facilities fit into the Directive is essential.
5. Resale
TATOC supports the focus the new Directive brings
to resale companies. However, we are concerned that paragraph
e of Annex 4 makes provision for resale companies to make a charge
for withdrawal from a contract. We are concerned, as we are with
the same provision in Annexes 1, 3 and 5, of the proposed Directive,
that this facility could be abused by disreputable companies and
we would prefer to see this opportunity removed.
Article 3 (3) places the onus to provide a purchaser
with the information in Annex 4 on the resale company. This task
may be extremely difficult, if not impossible, for the resale
company to deliver and to be sure that the information is up-to-date.
We recognise the need for a purchaser to have access to all relevant
information but the practicalities of delivery must be given further
consideration or the onerous task placed upon the resale company
may be an impossible burden and will further stagnate the already
difficult legitimate resale market. This will greatly disadvantage
consumers and, in particular, will work to the great detriment
of aging owners or others who, for whatever reason, may find themselves
in urgent need to sell their timeshare.
Article 6 paragraph 1 refers to a ban on "advance
payments" within the cooling-off period while Article 6 paragraph
2 refers to a ban on advance payments until the actual sale has
taken place or the resale contract is otherwise terminated. In
principle, we cannot see any justification for an "advance"
payment when a sale has been completed, nor do we understand the
concept of an "advance payment" when a contract is terminated.
This confusion about advance payments for resale
activity can only act against the consumer in one of the most
important areas the Directive has set out to address, and this
must be clarified.
6. Resort Constitutions
The majority (if not all) of timeshare resorts
or Clubs are based upon a published Constitution to which owners
and the timeshare company agree to abide and which forms part
of the contract between the two parties. The Directive gives no
recognition to these Constitutions which provide much of the requirements
of Annex 1 and far more. Annex l should be extended to include
any such Constitution or other legal agreement binding the owners
and supplier.
7. Flexible timeshare ownership and points
clubs
There is a growing trend within timeshare for
owners to purchase a flexible type of ownership which provides
for a range of holiday accommodation without the need to utilise
an exchange company. This may take the form of owning one or more
weeks within a specific time period at a range of specific resorts
within a management group, or ownership of a number of holiday
"points" which can be used to obtain accommodation at
a large portfolio of accommodation.
In such cases many of the paragraphs in Annex
1 do not have a practical interpretation and Annex I must be revised
to incorporate these products.
10 September 2007
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