Examination of Witnesses (Questions 1-19)
Mr Sandy Grey
12 JULY 2007
Q1Chairman: Welcome
to the Committee and thank you very much for coming to give evidence.
We are very grateful to you for agreeing to come and speak to
us about the European Commission's proposal to replace the directive
relating to timeshare and similar holiday products. We know that
there have been many problems for UK residents and other people
regarding the purchase of holiday products in general and the
new directive is intended to improve the protection of the consumer
with a wider range of products. There are just a few housekeeping
points. We have got an hour available to us for this discussion.
The session is open to the public although there are, as it happens,
no members of the public here but it will be recorded for possible
public broadcasting or web casting. A verbatim transcript will
be taken of your evidence and will be sent to you shortly after
this session. If you feel you need to alter it, please could you
do that as soon as possible so that we know we are putting the
right evidence out. You may submit supplementary evidence after
the session. Sometimes we do not fully explore the points that
we have raised and the witness wants to add something to what
he or she has said and it is very useful to us to have any further
thoughts you might have if we have not been able to cover everything
during our hour. I would like you to start by stating your name
and your official title for the record. You may also wish to begin
by making a statement and, if so, we would be happy to hear that.
Mr Grey: My name is Sandy
Grey and I represent the Alliance of Timeshare Consumers in Europe
which is a group of five independent timeshare organisations:
Greece, Germany, France, Sweden and the UK. I am also chairman
of the Timeshare Consumers Association in the UK which has been
going for about nine years now so we have a fair degree of experience
in the industry. I would like to make a five or six minute preliminary
statement which will attempt to answer I think the first question
which is the issue that was raised in the European Parliament
a fortnight ago. A Member of the European Parliament stated very
recently that timeshare is a criminal industry. I do not entirely
accept that generality. There are some good people in the industry
and there are some happy timeshare owners but unfortunately we
have rather more than our fair share of rogues in the industry.
These rogues got into the industry, or attempted to get into the
industry, in the very profitable 1970s and 1980s but the response
to their intrusion into the industry was totally different either
side of the Atlantic. The industry leaders in America, which is
a strong trade body formed in 1969 and supported by major hotel
groups, evolved a strategy to control the rogues and to create
a good long-term future for their own industry. That strategy
included two key issues: one which was a very strong self-regulatory
regime and, secondly, they encouraged and promoted legislation
to give consumer protection believing that will give a long-term
strength to the industry. In contrast, we in Europe, and mainly
based in the UK in those days, have been through a series of six
trade bodies with almost no support from the major hotel groups
and have failed to follow the US lead. Even now they appear to
lack the will to have a long-term plan to develop the industry
and let it grow. For example, they have a very ineffective code
of conduct and it resists every single attempt to legislate on
behalf of consumers. The results of those differentials between
the Americans and the UK are quite stark. Americans claim to have
4.4 million timeshare owners and it is growing at about 10% per
annum. In Europe, with a bigger population than America, we have
only 1.4 million owners and it is declining at about 3% per annum.
The lesson we have failed to learn from the States is that the
grab-it-and-run philosophy runs out in time and I believe that
time has probably already arrived. The consumer problems that
are caused by these rogues fall into three basic areas: the buying
of timeshare; the owning of timeshare; and the selling or getting
out of timeshare. Let me give some quick examples of all three.
Most sales are made to consumers whilst they are on holiday in
a country not of their residence. For UK citizens it is usually
in Spain or Portugal or the Canaries. In many cases they sign
to get out of that very intense hot-house atmosphere, hard sell,
three or four hours of intensive highly structured presentation,
lies told by sales people, failing to put the key benefits of
the purchase in writing so they are just verbal. For example,
they will say that the purchase is a good investment, you will
get all your money back when you are selling, which we will find
out later is certainly not true. They say "Yes, you can go
on holiday in August guaranteed." Perhaps yes, but only if
you do not mind sharing your bed with nine strangers. Then there
is the development of loophole products where there is no cooling
off period and no ban on taking of a deposit. The best known of
these is what the Commission called long-term holiday products,
we call holiday clubs, which look similar to timeshare, smell
similar to timeshare, are sold in an identical manner to timeshare
and are priced the same as timeshare so the consumer is confused.
The other loophole was the 35 month trial package which was invented
by the industry in 1997 when the new directive became effective.
It produced a lower cost avoidance of the law designed to get
the consumer in the hands of the sales people when they went on
holiday for the next 35 months to try and persuade them to buy
the full-blown timeshare. The second area is the owning of a timeshare.
There have been excessive fee increases. Two of the largest organisations
in the industry both have increased their fees by double in less
than 10 years at a time when inflation has only gone up by 35%.
With the declining number of owners, resorts are being closed
for re-development as hotels, shopping precincts or whatever.
There is a general squeeze to get rid of owners where the resorts
are starting to decline. The final area where there are problems
for consumers is what we call getting out. There is hardly any
natural demand to buy timeshare. We produce a series of help sheets:
one is called How to Buy Timeshare and one is called How to Sell
Timeshare. For every one How to Buy Timeshare we send out, we
send out 500 How to Sell, a clear indication of the lack of the
demand. Many time shares, as a result, are worthless. These are
the problems we believe this new directive should be addressing.
What I have not mentioned, and do not intend to do so unless you
wish me to, are the frauds that are operated within the industry
and on the periphery of the industry which are not addressed and
the directive has no intention of addressing.
Q2 Chairman: We will come to that point
later on in our discussion. I want to start the questions by asking
you to what extent you think the situation in Europe was improved
by the 1994 Timeshare Directive and what have been the strengths
but particularly the weaknesses, following on what you have been
telling, us of that directive.
Mr Grey: The main changes of the directive,
I am sure you already know, are to introduce a cooling off period.
Q3 Chairman: You mean the current directive,
the proposed directive? I was asking about the effect of the 1994
directive.
Mr Grey: I was going to come on to that.
The 1994 directive did not become law until 1997 which was a trigger
point for quite a lot of action within the industry. It introduces
a cooling off period, which we already had under UK law of 14
days. It introduced a ban on the taking of a deposit and it introduced
a modest level of written disclosure of the purchase. From the
point of view of the old directive, as we will call it, the ban
on the deposit and the cooling off period gave very good improvement
to consumer protection. It may be an odd way of putting it but
the industry itself claims that its decline started from that
very day. It was suffering something like 50 or 60% cancellations
so obviously it was working. The weaknesses of the existing directive
are three-fold: first of all, the loophole that was invented by
the industry, the 35 month trial package which got below this
three year directive limit on the law, is now the most intensively
marketed timeshare product as opposed to long-term holiday product.
It is still a major problem to us where people are buying with
no cooling off period and no ban of deposit. The other loophole
is the holiday club, which I mentioned already, using exactly
the same techniques as timeshare and promising some marvellous
availability of accommodation, marvellous availability of holidays,
which simply do not exist. In some cases they are figments of
somebody's vivid imagination. The negative side of the existing
directive were developments of new products. In the days before
the directive the basic product in timeshare was a fixed week
of accommodation. You bought week 36, which is the last week in
August, and you knew you had that last week in August in perpetuity.
The new products were floating periods where you bought a choice
in a red band, which is a high season band, but you had to book
it each year so it was subject to availability. I am sure this
will come up a number of times later this morning. The points
scheme works in a similar way where the purchaser acquires points
and uses that as currency to book accommodation year by year,
again the problem subject to availability. A final downside or
weakness of the directive was it has encouraged much more aggressive
selling techniques.
Q4 Baroness Greengross: You have mentioned
holiday clubs. I think I know what a holiday club is but it would
help me if you could explain the term precisely. You have mentioned
some of the problems that that 1994 directive threw up regarding
those definitions. If you could clarify that it would help me.
Mr Grey: Would it help if I gave you
a definition for timeshare and a definition for long-term holiday
products in a simple way? Timeshare is effectively an acquisition
of a legal right of use of accommodation. It is usually held in
trust or by some form of real estate registration or public register
as it is in Spain and Portugal. Technically once you have it,
it cannot go away; it is certain. It is only certain in respect
of the fact that you have to carry on paying the annual management
fees to keep the rights maintained. Timeshare has a certainty
about it and a feeling, a pseudo feeling, of real estate ownership,
hence the word timeshare owner. Holiday club is a promise to book
accommodation or a whole package through an agent. It is no different
in any way from going to the high street or going to Thomas Cook
and saying "I would like to go to Tenerife." The only
difference is that the sales people promise, when you join this
club which gives you access to the booking system, you are getting
very good choice, you are getting very good quality and you are
getting big discounts, none of which are true. The holiday club
is only offering the same as is available off the internet, teletext
or the high street.
Q5 Baroness Greengross: Why "club"?
What is the club bit?
Mr Grey: It is simply an organisation
which you join when you pay the money. A holiday club is where
you phone or write or email to book your accommodation. It is
rather like a Christmas club in some peculiar way.
Q6 Baroness Greengross: There are no
membership benefits at all?
Mr Grey: No, none at all.
Baroness Greengross: That is extremely
helpful to me, thank you.
Q7 Baroness Gale: You have already talked
about the present cooling off period of 10 days and the proposal
to take it to 14 days. You have said you think it could easily
be changed to the 28 days. Could you tell us what are the problems
with 10 days? Could you say why you think it would be better 28
days and do you think that could have a detrimental impact on
the future development of timeshare?
Mr Grey: Can I go back to the beginning
of the history of the cooling off period. The first law to introduce
a cooling off period was the Timeshare Act 1992 introduced in
the House down the corridor. It gave a 14 day cooling off period
and that was 1992. The 1994 Directive, which became the 1997 law
in Europe which is the current directive, went backwards to a
10 day period at a time when it was quite clear people were taking
longer holidays. It is now becoming apparent people are taking
even longer holidays. Point number 1 is that we must protect people
not only today in the current holiday time pattern to give them
time to come and think about itand I will come back to
that in a minutebut the Commission did say they wish to
future-proof the new directive. Future-proofing must allow for
longer holidays which people are taking throughout the whole of
Europe. Coming back to the point I made earlier, the purchase
of timeshare is almost always made overseas. It is nearly always
made on the first or second day of someone's holiday: white knees,
red face, recognised very quickly as having just arrived. There
is a long time before their brains are back in gear and back home
and able to do research and ask us or other people questions about
what they bought. That time now is quite clearly not enough. We
get a number of inquiries from people who say "I signed up
on so-and-so a date" and I say "You have passed the
time". "Oh dear, we did not know." 14 days is already
inadequate and will become more and more inadequate as the years
go by. In the Commission's proposals last year a range of periods
were proposed: 14; 21; 28 days, which is what we proposed; one
or two people proposed 30 days; and one person actually said one
year but that is a bit impractical.
Q8 Baroness Gale: Do you think you will
build up support for the 28 day proposal?
Mr Grey: I would like to think the Commission
would move from 14 at least. The further they move the more beneficial
it will be in the longer term. An issue that may come up later
on is that the existing directive should have been reviewed five
years ago. If we delay reviewing the new directive by a further
five years, making it 10 years, we are well into longer holiday
periods which 28 days would cover but not 21 or 14.
Q9 Baroness Greengross: What does the
United States do about that?
Mr Grey: The United States has different
laws in each State: five days, 10 days, and I think one is 13.
As the bulk of the people in the United States are from the United
States they are nearer home and do not have this problem of going
away for a fortnight and coming back again so it is less of a
problem to them.
Q10 Baroness Howarth of Breckland: I
am not clear why the industry are so fiercely against the extension
except that it gives people time to withdraw on reflection.
Mr Grey: If you asked the question what
is the effect of a longer cooling off period going to be, the
answer is for the timeshare industry it will have a detrimental
effect short-term. If they can revise their policies and practices
for selling so that people use a longer cooling off period as
a marketing tool and people are comfortable with this, it will
have a beneficial effect. As far as long-term holiday products
are concerned, the cooling off period will kill them with sighs
of relief all around.
Q11 Lord Moser: On the withdrawal period
point as part of the cooling off point, I now picture this poor
family in Tenerife or somewhere and there is a cooling off period,
how can they possibly get out of it or perhaps they are not even
there yet. They got into it because of the problem organisations
that you pictured so well and demand is declining like mad. In
asking about the withdrawal period I also want to ask you in general.
Listening to you, my inclination would be the best thing would
be to close the whole thing down and not to have timeshare any
more because of all these problems. There is a very steep decline,
wealth is increasing all over the place so people might buy things
in total rather than time sharing, but presumably you are arguing
that timeshare is a good thing if only it were properly regulated.
Could you talk a bit about the bits of the withdrawal period other
than cooling off which you have dealt with in giving information
and all that but in the context of why it is necessary to rescue
this whole business?
Mr Grey: I do not think I agree entirely
with Lord Moser's view. May I state a view on timeshare. My view
is that it is a valid holiday product. It offers a facility for
people to get good quality accommodation at prices lower than
they would normally have to pay through owning their own villa
or whatever. The principle is right but the problem has been the
people in the industry. There are too many rogues in Europe. If
by legislation and other means we can discourage the rogues, perhaps
ending up with a smaller industry than we currently have but providing
the original image of the product, quality of accommodation, just
pay for the bit of time you wanted to use, I would fully support
that. How you tell people about the cooling off period I think
was your question.
Q12 Lord Moser: How they can withdraw.
Mr Grey: The UK Act has a very good piece
in it, only amended five years ago, which required the cooling
off period to be clearly disclosed in print no smaller than the
largest print on the paper on the front face of the purchase agreement
next door to where people sign which says very clearly you have
until X, Y, Z date to cancel the agreement. That is an excellent
idea and the directive should adopt that as well. At the same
time, if we are going to say in the purchase agreement that there
is a cooling off period we should also say in the purchase agreement
there is a total ban on the taking of a deposit. These are the
two key lock-in issues for purchasers. If they are disclosed clearly
to them in the purchasing point they will have much more ability
to choose what they want to do.
Q13 Lord Moser: On the more general point,
you talk about a smaller industry across Europe. Is that what
you have in mind, having got rid of the problem organisations?
Mr Grey: I am trying to project what
I see is happening in the current industry. It is in decline.
There is about 8 or 9% less owners now than there were five years
ago.
Q14 Lord Moser: You attribute that to
the problem organisations?
Mr Grey: To a great extent, yes.
Q15 Lord Moser: Not to social trends,
financial trends.
Mr Grey: No. If you look at America,
it is really growing. It can be done but we are just doing it
wrong.
Q16 Lord Wade of Chorlton: Clearly the
reason why there is decline is the industry in this country is
not even controlling itself. It is not taking any action to try
and make the industry more acceptable so that it would grow. Why
is that? Is it an industry that attracts unscrupulous people or
is it an industry that has not actually got within the hands of
honourable companies who can see the growth opportunities and
want to run it effectively? Normally if there is a business that
can make money for somebody, generally they want to run it well
because by running it well it grows and you get consumer confidence
in it. It is rather odd that people should want to run an industry
in such a way that people want to use it less and less.
Mr Grey: That is absolutely right. The
problem comes back to the fact that the industry has never got
itself together in a coherent, strongly led organisation. It has
had six trade bodies. It has not got the support of the big powerful
medium which is the hotel groups in Europe where it has in the
States. Nobody has taken the industry by the scruff of the neck
and said "If you want to be here in 10 years time earning
decent profits, you have to do it this way." It seems to
be short-term-ism, that is rogue-ism, that is grab-it-and-run-ism.
I do not see any solution to it other than legislation to wrap
the knuckles so hard they have to change their policies. That
is why I am hopeful the directive will do exactly that.
Q17 Lord Wade of Chorlton: I wanted to
raise points on the information provision of the directive. Could
you explain how the information obligations in the proposed new
directive differ from those in the existing directive and would
you choose to add any items of information or to consider any
to be superfluous for the consumer?
Mr Grey: The new directive introduces
a little bit more requirements on disclosure of benefits but not
very much; it is a marginal move. Our view is that there should
be much more profound precise defined disclosure. For example,
there are no requirements in the new directive to say precisely
what a person is purchasing. The word "exact" is used
in the new directive. "Exact" is a phrase which is interpreted
by traders in a totally different way than by consumers. What
I would like to see is guidance notes by the directive to state
that the following items should be included in the disclosure.
Availability is a big issue. I joked earlier on about sharing
a bed with nine other people if you go in August because everybody
wants to go in August and there is not the capacity. It should
be precisely spelt out in the document whether you can or cannot
go in any high season. Secondly, I think there should be a disclosure
as to the current value of what is being purchased. I know it
is an odd thing to do. If you buy a motor car you do not have
to say that it is only going to be worth 70% less tomorrow morning
but with timeshares now worth sometimes 5% of what they were when
originally bought, sometimes worth nothing, I believe consumers
must be given that information. The third area is drifting into
another area which I hope we will be discussing later on and that
is ownership rights. I believe the directive should state very
clearly that owners do have control over the standards and operations
and costs of their club or resort. They do not at the moment and
that is one of the main reasons why there is this distress amongst
owners, massive increase in fees and owners just walking away.
Q18 Lord Wade of Chorlton: Do you think
that the government, through the Office of Fair Trading, could
have been successful in informing consumers of their rights in
the existing directive? What further things could the UK government
do to get more information on these issues across to the consumer?
Mr Grey: The Office of Fair Trading and
the DTI before them made reasonably good efforts to educate consumers
about their rights within the timeshare business. The old story
of financial constraints keeps coming up of course. My own belief
is that the targeting of education should be done very precisely
and the best place to do it is when people are flying away to
Benidorm, Tenerife or wherever, with adverts on the back of flight
magazines, leaflets in the airports and so forth. That was done
to a limited extent but it was done only as a campaign and, as
you know, campaigns last four or six weeks and then die. If the
OFT would operate a campaign over two or three years, maybe lower
key, aimed precisely at that area I belief the education would
improve quite considerably. We could look at how the Swedes do
it. They have half an hour a week of school education on your
consumer rights.
Q19 Lord Wade of Chorlton: Across a whole
range of issues.
Mr Grey: Yes, it is a broader issue I
know.
Chairman: They seem to be reforming the
education curriculum at the moment so maybe you should make your
input to the correct department.
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