Examination of Witnesses (Questions 20-39)
Mr Sandy Grey
12 JULY 2007
Q20 Baroness Howarth of Breckland: Do
you have relationships with other consumer organisations? Have
Which, for example, run anything on this in their magazine?
It maybe quite middle class but it does have a circulation.
Mr Grey: We work quite closely with Which.
In fact I am helping at the moment with an article they are producing
for next February on timeshare. I have helped them with the previous
articles over the past four or five years. Which decided
about two months ago that their legal advice service, which is
an excellent service, would not touch timeshare. I inquired as
to why and the word "aggravation" came up. The problem
being that a single consumer, with a single timeshare problem
worth £3,000 or £4,000 requires an immense amount of
effort to battle against the rogues who will not answer letters,
not respond honestly and not to respond directly. Which
legal services found out to their cost it was not worth their
while. It is a frightening thought. On a similar parallel basis
with some lawyers if you walk into a law firm and say you want
to talk about timeshare your feet do not touch the floor as you
go out. It has a reputation.
Q21 Earl of Dundee: Returning just for
a moment to the rights of withdrawal, what is your view of the
facility within the directive which allows Member States to apply
their own more stringent national provisions?
Mr Grey: We believe that the new directive
should be harmonised totally throughout Europe: totally in countries
and totally in its terminology. The only area where the harmonisation
is not in existence so far in the proposed directive is in the
form of the cooling off period, how it is described, how it is
defined and how you make the application to cancelmodularity
as they call it. I see no reason why it should not be harmonised
but let me give you a reason why it should be. At the moment the
consumer has a mismatch of timeshare laws. In most countries there
is a 10 day cooling off period, in the UK there is 14, in Belgium
it is 15. The consumer does not know what cooling off period would
apply to his situation. As most consumers buy outside their country
of residence, we believe that everybody should know exactly what
their rights are wherever they are. That is my belief on harmonisation.
I do not see any reason why the directive should not define, first
of all, day one of the cooling off period. I am suggesting, a
bit tongue in cheek, it should be the day that the consumer receives
a counterpart copy of the agreement at his home address, i.e.
it starts from the point at which he gets home; secondly, that
the cancellation can be in any written form which has proof of
posting, which could be fax, email or registered letter; thirdly,
provided it is posted within the 14 day, preferably 28, period
that would satisfy the cancellation and the agreement would be
null and void. It is quite simple.
Q22 Earl of Dundee: I hear what you say
about the case for harmonisation, nonetheless that is not going
to happen. With the new directive when it comes into force there
will not be harmonisation. The United Kingdom, for example, within
the context of the new directive can choose to apply its own more
stringent national provisions. Is that the case?
Mr Grey: Yes. I am treating the directive
as a draft not as a final product. I have had information from
within the Commission that they will hear and attend to suggestions
such as these, hence I am sure this is the purpose of the hearing
today. I am not entirely convinced I agree with you. I believe
the Commission could be persuaded to go for total harmonisation.
They believe in it themselves and it is not very clear as to why
they have tolerated one element within the whole directive that
is not harmonised.
Q23 Earl of Dundee: At the same time,
would you perhaps adopt, and correctly so, a paradoxical position?
On the one hand, as you have explained to us, you would favour
harmonisation and what you would like to see, as you have also
drawn to our attention, is a package of changed measures. You
would like at least 28 days for the right of withdrawal. You would
like a clear and unambiguous ban on paying deposits. You would
like things put down clearly in writing so that the consumer is
properly protected in a way in which he is not at present. In
the paper you write and what you have been telling us today, these
represent some of the defects of the 1994 directive perhaps. So
in context, you begin by saying let us have harmonisation, yet
within harmonisation let us address the current defects which
subsist within all countries in the European Union. Then, however,
you recognise that this plan will not work therefore, you advocate
a compromise or an improvement, which is better than nothing but
which falls short of a proper solution. This happens when good
practice from some other EU states perambulates to others. This
conformity to good practice, say within Germany and France, might
cause a form of harmonisation by the back door or at least some
improvement for all by the front door.
Mr Grey: Our plan A is total harmonisation
with all the goodies built in. We recognise, exactly as you say,
that is possibly not going to happen. Plan B is exactly as you
say, that if we can persuade the DTI, who are the authority in
this matter, to introduce superior consumer protection in the
area where they are entitled to do so and perhaps use that as
argument throughout the rest of Europe. That is plan B if we do
not win plan A.
Q24 Chairman: I do not know how much
you know about the different attitudes of different Member States.
It might be that some Member States are quite keen to get a high
level of conformity and a high level of standards, as it were,
of how to conduct this business and others might be influenced
by internal pressures to be less keen on these high levels. Do
you think there is a problem about that?
Mr Grey: Yes, there certainly is. Can
I put some perspective on this situation. The largest number of
timeshare owners in Europe are in the UK, the second largest are
in Germany, the third largest are in France and then the numbers
decline around the various other countries. The largest area of
purchase of these owners is in Spain, and I include the Balearics
and the Canaries within that; secondly, Portugal; and then generally
throughout the rest of Europe. In the Commission meeting in July
of last year it was interesting to see who turned up and who did
not turn up. We were very disappointed to see neither anyone from
the Spanish government nor the Portuguese government attended,
as if they were disinterested. To support that point, the 1994
directive was introduced on the 30 April 1997 throughout the whole
of Europe except in Spain who took 21 further months to introduce
it and even then amended it, contrary to the statement in the
directive, by allowing a deposit to be taken by a third party.
The biggest problems we have are with Spain failing to enforce
the law, creating their own softening of the impact of the law
and clearly, at the moment, not showing a lot of interest in consumer
affairs in respect of timeshares in the future.
Q25 Chairman: It is a conflict between
the consumer populations, like our own northern populations, and
the supplier populations which, in the case of Spain and Portugal,
are less willing to limit the freedom of the supplier to supply
what he or she wants. That is the contrast, is it not?
Mr Grey: Yes.
Q26 Lord Moser: Does that imply that
the problem organisations are not evenly spread throughout Europe?
Mr Grey: May I have two minutes to answer
that question. Can I talk about fraud because that puts rogues
right in perspective. The two largest fraudulent operations are
the resale scam which is where a timeshare owner is telephoned
from Spain by somebody who says "We can sell your timeshare
for £5,000 or £6,000" when it is only worth £500
or £600, and then asking the owner to pay them some money,
anything up to £1,000, and he hears no more. That has been
going on for seven years. There are about 1,300 companies, to
our knowledge, in the business and the police in Spain take no
action whatsoever. Interestingly the police announced in October
last year they had arrested eight people for running 300 of these
resale scams. I phoned up the policeman I know in Malaga and said
if you give me the names of the 300 companies I will give you
a long list of their victims. "No, I cannot do that"
he says. It later transpired that the victims were all Spaniards.
The police are taking action on behalf of their own natives but
do not seem to be interested if a Brit or a German or a Frenchman
gets caught. I think thereby lies a big problem. That is right
the way through not only the fraud side of the industry but also
the rogue where it is perhaps not a fraud but breaking of the
law, the Timeshare Act for example.
Q27 Lord Moser: Are there problem organisations
in this country?
Mr Grey: A few but not very many.
Q28 Baroness Gale: I have two questions
on the advance payments. How best do you think consumers could
be protected from demands of advanced payment before the cooling
off period? What extent have the demands caused a problem for
the consumers? Could you explain how resale works in the timeshare
market? Do you think there has been a big problem for consumers
who made advance payments in this aspect of the market, the resale
side?
Mr Grey: The first question is how can
consumers be protected in respect of making advance payments?
I believe that by making it very clear on the purchase agreement,
as I suggested earlier, no advance payment of any sort, and the
directive is pretty good in the phraseology they use in that respect,
may be taken during the cooling off period. I can see no other
way, in the way in which the directive is couched, to enable that
to happen.
Q29 Baroness Gale: How does the resale
market work?
Mr Grey: There is confusion on the subject
of resale and that confusion has drifted into the Commission.
I hate to say this but I do not think they fully understand it.
There are two transactions that we talk about. The first transaction
is the sale by a trader to a consumer of either a timeshare right
or a long-term holiday product. The bulk of those transactions
are now of a product which has been pre-owned. Most timeshare
weeks have been owned by somebody beforehand and they are now
being sold for a second, third or fourth time by a trader to a
consumer. The confusion arises by the fact that the trader may
call that a resale, possibly is a resale, but our view is that
any transaction, irrespective of the age or definition of the
product, should be covered by Annexes 1 and 2 which cover trader-to-consumer
products. The other side of the coin is where a timeshare owner
wishes to sell his timeshare to either a trader or through a trader
as a broker. That should also be covered but separately under
Annex 4. At the moment the directive muddles those two together
and I have written the Commission to say please explain.
Q30 Baroness Gale: What you are suggesting
is a first time sale of a timeshare would be covered under the
legislation and then the resale should be covered by the same
legislation?
Mr Grey: No. Can I explain it in a slightly
different way? The concept of a timeshare week is presumably fully
understand around the table. Most timeshare weeks have been bought
before, maybe twenty years ago, and the owner has either gone
away, handed it back to the resort or whatever and so it is sold
again by the trader to a consumer. It is rather like a second-hand
car to be sold on and on. I am arguing that the transaction where
a trader sells a timeshare or holiday product to a consumer, irrespective
of whether it is new or well used, is covered by Annexes 1 and
2. The word "resale" is only applied to the other side
of the coin where the owner is selling to or through a trader;
it is consumer-to-trader transaction.
Chairman: I am sure we will get more
familiar with these ideas as our inquiry continues. You have met
us when we are just starting to understand these matters. We also
have an excellent adviser who will be able to explain if we have
any further questions.
Q31 Baroness Howarth of Breckland: I
want to talk about enforcement. I was very struck by the way you
described the industry and its incapability of developing a voluntary
code of any sort. In the light of that, there is enforcement proposed
in the new directive which is crucial to its success. We all agree
with that. What are your views on the provisions relating to judicial
administration and out-of-court redress in the context of how
you describe the industry? At the same time maybe I can ask the
next question as they are linked. How effective do you think the
various competent authorities have been in enforcing the existing
timeshare directive in countries of particular concern to your
association, which links again to the issue you raised on fraud
I believe?
Mr Grey: There are three questions there.
Can I deal with the last one first, which is how effective the
existing authorities have been. The Office of Fair Trading and
the Trading Standards Office are the primary authorities within
the UK for the Timeshare Act and directive and, in our view, have
been pretty successful. We know of very few cases where the Timeshare
Act in the UK has been breached within the UK. It is universally
breached outside the UK and it does apply to a UK citizen in the
EEA countries. So far the Office of Fair Trading and Trading Standards
have done a pretty good job and I do not see any reason why that
should change in the future. As far as the judicial side for the
future is concerned, coming back to Lord Dundee's comments about
lack of harmonisation, there is not enough precision as to what
a breach of the law should incur in the forms of fines or whatever.
We would like to see a menu system, a menu of events and fine,
quite clearly stuck up on the wall so people know if they tread
over that line that is what it will cost them. It will be a knuckle
wrapping exercise I hope it will work. That is missing and that
should be introduced. An out-of-court settlement is an interesting
exercise. A lot of people commented that we ought to have an EU-wide
timeshare ombudsman. We have a very good example of an ombudsman
service working effectively in the UK and that is the financial
ombudsman service. It works very well, in our view, and its strength
is that they act quite quickly, they seem to have a clear understanding
of their obligations within the laws that work, primarily the
Consumer Credit Act, and it does not cost the consumer anything.
If we could introduce a similar type of ombudsman service throughout
Europe, that would be an excellent move. The problem would be
enforcement. The financial ombudsman service can enforce it through
the fact that there is now enforced registration with the service.
From a timeshare point of view that would require licensing so
that the ombudsman can either threaten to withdraw a licence or
penalise a company on the threat of withdrawing a licence. We
know that the Commission is not very keen on the idea of licensing.
I know it is complex and expensive but it might well solve a lot
of not only redress problems but also act as a deterrent and replace
the judicial problem.
Q32 Chairman: Thank you for those answers.
I have one more question on our list which is coming back to the
level of sanctions imposed by Member States for infringements
of the current directive. It seems to me from what you have been
saying that the situation is a little wider than that. It is a
question of how you get justice for citizen A who has bought or
not bought something in country B. We are now talking about cross-border
justice of some sort or another. Could you expound a bit more
on these problems? You have told us quite a bit about it. I must
confess I was on Laws and Institutions, the other sub-committee
of this select Committee some years ago. I am no lawyer but what
I did get was a clear understanding that cross-border judicial
pursuit of people who are deceiving you if it is a civil case
is not that easy even today in the European Union. That is the
problem in this respect: getting a case or getting compensation
across a boundary is much more difficult. Is there an approach
in the proposed legislation that would sort that out or would
the consumer have to start learning about how these cross-border
efforts to get justice work in the broad sense before they could
tackle in the particular sense?
Mr Grey: I would hate to think the consumer
would have to do it himself in Spain or Portugal. The Office of
Fair Trading have set up arrangements now, a working liaisonand
I am sure Mike Haley will tell you about itwith the Madrid
police which means that the problem area, which is Spain, can
now be addressed from Central London and that might well help.
The Office of Fair Trading do not deal with individual situations
but only with groups but at least that is a move in the right
direction and does take the power of the consumer in the UK across
into the Spanish area. The other interesting thing is that a number
of consumers have grouped together to take action themselves at
their own expense. In the John Palmer case, when he was locked
up in 2001, we set up a group action to claim compensation and
were rewarded with a very substantial sum, which has not been
paid yet but we will wait and see on that. Secondly, a group of
owners in a resort in Lanzarote, called the Lanzarote Beach Club,
have initiated a criminal action in Lanzarote against eight people
who they believe were acting fraudulently with the intention of
following that up with a compensation claim when the case comes
to court. The third example is in Paris, France, Club Systeme
Vacances, which was a fraud run interestingly by a Brit in France.
Our French colleagues did exactly that: they set out to make a
compensation claim in the Paris courts on behalf of the victims.
Q33 Baroness Howarth of Breckland: I
thought it would be very useful if we had hard examples. It is
going to be quite sensitive in terms of our evidence in relation
to other EU partners. If we had examples they would be extremely
helpful.
Mr Grey: Would you like me to put this
bit of information in writing to you?
Q34 Chairman: Yes, that would be very
helpful. It might have to be anonymised in some way. We will have
to think about that. It is evidence we want of what can happen
and how group action can help to assist individuals in this kind
of thing. Another question has come to my mind. Is there a huge
difference in the fines, or whatever it is, that can be applied
across the European Union because of the existence of separate
legislative provisions as well as the European directive?
Mr Grey: I am afraid I do not know. As
it happens so seldom, we have no experience of it.
Q35 Chairman: The difficulty is getting
anyone punished is what you are really saying?
Mr Grey: Yes. The Office of Fair Trading
has a process of frightening the rogues off and it usually works
in the first part of the process.
Q36 Lord Wade of Chorlton: Going back
to the point you were making about the decline in the industry,
when you are talking about decline do you say there are less people
now out of the UK or across Europe who own timeshares or are there
fewer people going into the timeshare, in other words is the rate
of growth down or the actual number of people who own timeshares
down?
Mr Grey: In simple terms timeshare has
a finite life for an individual. They may own it for 15 or 20
years, often buying at 50 and getting out at 70, so we have wastage,
and wastage for many other reasons as well. There is always about
10 or 15% of the population of timeshare owners going away. Up
until about five years ago that wastage was being replaced by
sales. As sales have declined that wastage is not being fully
replaced and we now have a discrepancy of 2, 3 or 4% between people
walking away and being topped back up again by sales.
Q37 Lord Wade of Chorlton: There are
fewer people now interested in investing into a timeshare of any
kind?
Mr Grey: I would not like to say that
is the case but certainly there are fewer people involved as owners
of timeshare than there were five years ago.
Q38 Lord Wade of Chorlton: Are you a
timeshare owner?
Mr Grey: I was until about six months
ago.
Q39 Lord Wade of Chorlton: Did you come
to a period where you did not want to do it or did you come to
a decision?
Mr Grey: A rogue took over my timeshare
resort and I did not want to get involved.
Chairman: We have had an extremely interesting
and very useful introductory session with you. You have told us
a lot of things that some of us knew but I do not think any of
us knew all of it. It has been very helpful and thank your very
much for coming before us. We are already going to get something
from you, the cases that you drew to our attention, but if anything
else should occur to you within the next few days which you think
would be helpful, bearing in mind the trend of our questions,
we would love to hear from you. That would be very welcome.
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