Select Committee on European Union Minutes of Evidence


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 cancel—modularity 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 liaison—and I am sure Mike Haley will tell you about it—with 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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