Memorandum by The Timeshare Consumers
Association
This response is based on the information and
views expressed by the 10,000 or so consumers who contact the
Timeshare Consumers Association ("TCA") each year.
[Paragraph numbering is as the numbering in
the "call for evidence"]
1. There is a powerful rationale for binding
legalisation rather than a voluntary agreement because the existing
voluntary arrangements, based on the Code of Ethics of the timeshare
trade body, Organisation for Timeshare in Europe ("OTE"),
are ineffective:
(a) The OTE only represent a small fraction of
the traders in the industry having 69 trade members out of an
estimated 800 companies in the industry.
(b) The Code of Ethics lacks any substantial
consumer protection over and above that already provided by statute
law. In many cases the Code is weaker than existing laws.
(c) OTE have systematically failed to enforce
the Code on its members who now routinely breach the Code with
impunity.
(d) The Code does not have the endorsement of
the Office of Fair Trading.
We therefore see no prospect of a voluntary agreement
system becoming effective within the EU.
2. Timeshare and Long Term Holiday Products
are almost universally bought by consumers on holiday in a country
other than their country of domicilegenerally north Europeans
buying in southern European countries. It is therefore essential
that legalisation should be harmonised throughout the EU to ensure
that consumers are quite clear as to their rights wherever they
buy. Currently there are at least six different variations of
law resulting from the "minimum" requirement of the
current Directive which provide dishonest traders with opportunities
to confuse consumers.
3. The existing Directive has provided a
reasonable degree of consumer protection but has been overtaken
by new products and practices, many designed to circumvent the
protective nature of the Directive. Typically:
(a) "Holiday clubs" (Long Term Holiday
Products) appear to have been created simply to avoid the current
Directive. These are now incorporated in the proposed Directive
as are other circumventions such as canal boats and periods of
less than three years.
(b) With more consumers now taking holidays lasting
for more than one week the existing 10 day cooling off period
is insufficient. This is discussed later at paragraph 7.
(c) Both the existing Directive and the proposed
Directive fail to address the problems now confronting owners
of timeshare where annual costs, which are mostly outside
their control, are escalating at a rate some three times faster
than inflation. Not only does this put timeshare at a financial
disadvantage with readily available accommodation rental but places
a financial hardship on those consumers on fixed incomes such
as retired couples.
4. The scope and definitions of the proposed
Directive are generally acceptable. However the following amendments,
together with others mentioned elsewhere in this response, would
improve consumer protection:
(a) We believe that full harmonisation of all
aspects of the Directive is essential for best consumer understanding
of their rights. We therefore would like to see Article 1, Clause
2 removed. This is commented upon later under paragraph 8.
(b) There is some muddled thinking in the wording
of Article 2, Clause 1c where the concept of a "resale"
appears not to be fully understood by the Commission. See paragraph
14(a) below.
5. The proposals relating to disclosure
and advertising lack sufficient precision to assist traders or
give comfort to consumers. For example the word "exact"
(clause 2 of Annexes I, III and V) is used. "Exact"
is a word that will almost certainly be interpreted differently
by salesmen and by consumers. We believe that the disclosure requirements
should be laid down in detail, preferably in the form of a regulation
which can be swiftly amended in the light of changing trader practices.
All the main elements of disclosure should be clearly stated on
the front face of the purchase agreement in print no smaller than
the largest print on the page. [This is the requirement in the
amended Timeshare Act 1992 which appears to work well]. The main
elements to be disclosed (in addition to those normally required
within a contract) are:
(a) The current resale value (to the consumer)
of the product being purchased. Many purchasers are encouraged
to believe that the value of their purchase will improve over
the years. This is not the case as timeshare periods, when eventually
sold by the consumer, are only worth a fraction of what they originally
cost and many are entirely worthless. All holiday club memberships
are totally worthless in the secondary market.
(b) The right to a cooling off period and the
absolute ban on the taking of a deposit.
(c) The current annual charges of using the product
together with a four year history of these charges and a statement
that owners/members have the ultimate say in the level of future
annual charges.
(d) For schemes which involve booking accommodation
each year (ie floating weeks, points and exchange) a list of concrete
examples of availability covering all geographic regions and all
months of the year should be provided, not just for exchange as
required by Annex V.
6. Consumers can best be informed by national
governments about their rights through specifically targeted promotions.
Typically this would be leaflets distributed through travel agents;
advertisements in in-flight magazines and notices in airport areas.
7. The terms of the right of withdrawal
are satisfactory for consumers except in respect of the period,
which is proposed as 14 days. In the UK we have had a 14 day cooling
off period for 13 years and it is now too short as many consumers
take 14 day holidays and are caught early in their holiday and
do not get a chance to check out their purchase until some days
after their return. A cooling off period of 21 days would provide
those consumers with a much better chance of obtaining the information
they need to make a rational decision. However, as the Commission
has indicated that it wants to "future proof" the new
Directive, we consider that a 28 day would satisfy this objective.
8. The Directive fails to provide a fully
consistent regime by allowing national governments to apply more
stringent provisions in respect of the cooling off period. We
are strongly of the view that the length, start point, modularity
and effects of exercising the rights to cancel should be the same
throughout the EU otherwise consumers will be left in the same
uncertainty as present where at least six different rules apply
depending on the country of purchase and/or the country of domicile.
9. Consumers can best be protected from
any demand for advance payments by having the ban on deposits
clearly disclosed on the purchase agreement alongside where they
sign. See paragraph 5(b) above.
10. The taking of a deposit will become
a major problem for consumers if it is allowed under the proposed
Directive (it is already banned under the current Directive):
(a) 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.
(b) The importance of a total ban on taking of
a deposit is reinforced by the very strong campaign by rogues
in the industry to have the ban removed as they perceive the retention
of a substantial sum as a means of locking-in purchasers to an
unwanted agreement.
11. The Commission have failed to take the
opportunity to establish an effective sanctions, monitoring and
enforcement regime. A licensing system with a Timeshare Ombudsman
empowered to fine, order compensation or, in the ultimate, to
withdraw the licence from a trader, would be an economically effective
means of ensuring that the Directive works. And a licensing scheme
would also overcome the problems for consumers seeking compensation
from traders registered outside the EU.
12. Failure to penalise breaches of the
current Directive in Spain (and, to a lesser extent, Portugal)
encourage us to believe that sanctions should be established at
EU level which would provide a more powerful voice to persuade
the Spanish authorities to act. Additionally we believe that the
new Directive, because it mostly applies to "cross border"
transactions, should be harmonised as far as it is possible to
do so.
13. [It is not clear what is the purpose
of this question].
14. We have further comments on the proposed
Directive:
(a) The Directive completely excludes any protection
for timeshare owners. This is an important omission as
ownership is now the major area where consumers are suffering
detriment. We consider that the proposed Directive should be extended
to provide detailed rights for owners (and club members) in respect
of the quality standards of their resorts and the annual costs
of ownership. However, as shown above at paragraph 5(c), we believe
that some protection for owners can and should be included within
the disclosure requirements.
(b) We do not consider it necessary to legislate
for "resales" except to ensure that a consumer wishing
to sell his ownership to or through a trader should not be required
to make any payment to the trader. Our understanding of the proposed
Directive is that all sales by traders "in the course of
business" to consumers would be regulated by the Directive,
so "B > C" transactions would be already be covered.
We suspect that the Commission has failed to understand the word
"resale" and have added complications which are unnecessary.
(c) The proposed Directive makes no attempt to
legislate on the legal structure of timeshare. Whilst weaknesses
in the existing system are now becoming apparent as resorts are
closing (making owners "homeless") we consider it impracticable
to impose a legal structure on existing resorts but all future
resorts should have a structureprobably based on public
registration of individual owners rights where that is lawfulthat
provides security of tenure for timeshare owners.
(d) Article 5, Clauses 2 and 3 do not include
the extension of the cooling off period for the purchase of Long
Term Holiday Products (Annex III). This omission has been recognised
by the Commission who intend to correct it.
(e) The proposed Directive is imprecise about
the effect of a trader failing to provide the information (Article
5, clause 3) as required by the Annexes. We believe that failure
to provide the required information within the 3 months and 14
days should automatically render the agreement null and void.
(f) Article 5, clause 1 extends the cooling off
period by one day if the fourteenth day is a public holiday. This
is confusing as each state has different public holidays and it
is not clear whether the relevant public holiday is that of the
country of purchase or country of domicile of the purchaser. This
extension should be removed for clarity.
(g) There should be no penalty of any sort on
a consumer who cancels in a timely and proper fashion, as indicated
by Article 5, clause 5.
(h) Finally, the Directive should be reviewed
every five years to avoid anti-consumer practices becoming enshrined
within the industry.
13 September 2007
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