Memorandum by Organisation for Timeshare
in Europe
As the trade body for the timeshare industry
in Europe, OTE (The Organisation for Timeshare in Europe) is pleased
to be given the opportunity to respond to the questions posed
by Sub-Committee G, the Select Committee on the European Union.
This paper has been written on behalf of OTE members, who form
the larger part of active operators in Europe.
1. BINDING LEGISLATION
VS A
VOLUNTARY AGREEMENT
Through the application of the OTE code of conduct,
the vast majority of timeshare operators in Europe have supported
a self regulatory scheme since OTE's formation in February 1998.
The code covers not only the sale and marketing of timeshare products,
but also resale, exchange and other holiday options which are
not covered by the 1994 European Timeshare Directive, such as
trial timeshare packages. The code is regularly reviewed to adapt
to changes in the marketplace and is extremely effective—complaints
about OTE members have reduced by 60% since 2002 and the vast
majority are resolved within 14 days of receipt. To further strengthen
consumer protection, an Alternative Dispute Resolution Scheme,
developed and independently administered by the Chartered Institute
of Arbitrators, was introduced in 2005. To date, only one case
has been taken to arbitration, the success rate of resolving complaints
being so high that the service is seldom called upon.
OTE is in full support of voluntary codes of
conduct and also supports principle based legislation which grants
consumers firm and effective rights, such as the Unfair Commercial
Practices Directive. It is the combination of principle based
legislation and clear codes of conduct that provide good consumer
protection. The advantage of codes of conduct is that these can
be swiftly amended to reflect new market practices or the introduction
of new products and services thereby ensuring that the requirements
found in the principle based legislation are clarified to also
apply to the new practices or products and services.
OTE acknowledges that the 1994 Timeshare Directive
has been a success for timeshare products and services, that levels
of consumer protection are high, particularly when coupled with
the OTE code and, as a result, consumer confidence has increased
and complaints have decreased. In view of the success of the existing
Directive and the lack of evidence (no significant volume of timeshare
complaints), to back up any claims that it is not functioning
effectively, OTE does not support the European Commission's proposal
to introduce a new Timeshare Directive which focuses heavily on
re-regulating the timeshare industry. Where it concerns new products
or services such as Discount Travel Membership Clubs, OTE calls
for enforcement of existing laws to target those operators that
are the real cause of consumer detriment. Finally, if new legislation
is necessary, it should follow the same format of the Unfair Commercial
Practices Directive, focussing on general principles rather than
tying consumer protection to specific services or products, which
will be obsolete once new services have been developed with the
aim of circumventing the requirements of the new Directive.
2. THE RESPECTIVE
ROLES OF
EC LAW AND
NATIONAL LAW
It is clear that the EU has the role to ensure
that consumers benefit from a high level of consumer protection
throughout the EU. As such it is also in the interest of consumers
and businesses for consumer rights to be the same across the EU.
This benefits cross-border purchasing and allows British consumers
to feel as protected when buying overseas as when purchasing at
home.
At the same time the EU should leave to Member
States rules that dictate how, in practice, such consumer protection
is achieved. In the case of timeshare, the EU should not decide
how timeshare usage rights are secured and guaranteed, but it
should merely state that this should be the case.
3. STRENGTHS
AND WEAKNESSES
OF THE
EXISTING DIRECTIVE
OTE believes that the existing Directive has,
in general, worked well and that the decrease in complaints has
been as a result of the introduction of legislation combined with
the OTE code of conduct.
However, we know of no other industry that is
penalised with a cooling off period and a ban on deposits and
a significant number of large hospitality brands, predominantly
US based, will not operate in the EU under such punitive restrictions.
At present, nine EU Member States have allowed for third party
deposits and OTE strongly advocates that this system is extended
to all other Member States. By allowing deposit payments to independent
third parties, this will stimulate the development of timeshare
and encourage operators to start business in Europe, whilst at
the same time protecting monies paid by the consumer. OTE believes
that singling out timeshare without any good reason puts the industry
in a less competitive position compared with other tourism services
and products.
Finally, the current Directive and the proposed
new Directive, being "vertical" will always need regular
updating to reflect the introduction of new products that regulators
believe should be sold with a cooling off period and deposit ban.
This inherent weakness can only be overcome by moving away from
vertical legislation to horizontal principle based legislation.
4. SCOPE AND
DEFINITIONS OF
THE DRAFT
PROPOSAL (ARTICLES
1 AND 2)
It is clear from the European Commission's Impact
Assessment that the real problems do not lie with timeshare, but
with other holiday products that bear little resemblance to timeshare,
namely Long Term Holiday Products/Discount Travel Membership Clubs.
With this in mind, OTE fails to understand why the Commission
chose to review the Timeshare Directive prior to, and outside
of, the consumer Aquis, when timeshare is not the cause of major
consumer detriment.
Whilst OTE supports the inclusion of canal boats,
caravans and cruise ships in the Proposal, there is concern that
by extending the definition of timeshare to cover products of
one year or more, this will adversely affect timeshare trial packages—a
cost effective and successful means for consumers to stay at timeshare
resorts and mix with owners before going on to make a purchase.
The additional costs to the operator will, however, make these
economically unviable and it is likely that these products will
no longer be marketed, depriving consumers of an opportunity to
"test drive" the timeshare product.
5. INFORMATION
PROVISION AND
ADVERTISING (ARTICLE
3 AND ANNEXES)
Whilst OTE supports the majority of the requirements
outlined in Annex 1, which by and large ensure further transparency
on the part of timeshare operators, too much information, including
non-material information, is required to be incorporated into
the timeshare contract. This will lead to an exceptionally high
number of pages to be read by the consumer.
Annex III, relating to Long Term Holiday Products,
does not go far enough and may leave consumers exposed rather
than better protected. The club operators should be required to
disclose the precise nature of the accommodation within their
portfolio, whether the accommodation is owned direct or forms
part a rental scheme and if so, the duration of the contract with
each supplier.
OTE is concerned that the provisions for exchange
companies (Annex V) are unduly onerous and at times confused.
For example, the Proposal states that exchange is an ancillary
contract and should be cancelled automatically if the consumer
cancels the timeshare agreement. However, the Annex requires that
exchange companies indicate how a consumer can cancel the exchange
contract—this is irrelevant as the consumer does not need
to take any action. Furthermore, the requirement for exchange
companies to disclose the cost of running resorts, including management
and repairs is irrelevant to an exchange guest, who does not contribute
towards these services. Finally, to require that all resorts and
accommodation available are disclosed in all languages could,
in the case of one exchange company alone, result in the inclusion
of up to 3,300 resorts plus all apartments in these resorts—some
3,000 pages for consumers to review.
The ban on any fees for resale companies (Annex
IV) will serve merely to restrict the practices of bona fide resale
agents who currently charge perfectly legitimate fees for an upfront
service which is directly requested by the consumer, such as advertising.
Furthermore, as the proposal clearly states that this Directive
applies only to business to consumer transactions, any requirements
on a timeshare owner selling their timeshare (such as the need
to follow the Annex I for Traders of timeshare) are therefore
contradictory and should not be included in the Directive.
6. INFORMING
CONSUMERS ABOUT
THEIR RIGHTS
IN RELATION
TO THIS
DIRECTIVE
OTE would add its support to a Europe wide information
campaign, working closely with partners such as the European Consumer
Centres, the DTI and the OFT.
7. THE RIGHT
OF WITHDRAWAL
(ARTICLE 4(3) AND
ARTICLE 5)?
OTE is in full support of a cooling off period
and believes that to avoid confusion, this should be harmonised
throughout Europe. However, evidence points to the fact that the
majority of consumers who cancel do so during the first few days
of the cooling off period. As a result, extending the period from
10 to 14 days will not lead to an improved environment. This aside,
however, OTE supports a 14 calendar day cooling off period which
is far easier to calculate—and less open to confusion—than,
for example, 14 working days.
OTE believes that written details of the cooling
off period should be included in the contract, together with the
date of cancellation and details of where and how the consumer
should cancel. However, by including three places for the consumer
to sign, this appears more like a "health warning" and
OTE advocates that just one place to sign is sufficient. Too much
documentation and too many places to sign merely serve to confuse
the consumer and a short, clear and concise contract is better
for the industry and better for the consumer.
8. ESTABLISHING
A MORE
CONSISTENT REGIME
ACROSS MEMBER
STATES
OTE is concerned that as the proposed requirements
of the new Directive would impose further restrictions on the
timeshare industry, if individual Member States elect to exceed
the provisions, this would undoubtedly have a negative impact
on timeshare. In the UK, timeshare is a vital economic contributor
to the small rural communities in which resorts are based and
to place them at a disadvantage with their European counterparts
would be damaging to the area in terms of year round employment
and the benefits to local businesses.
9. ADVANCE PAYMENTS
OTE does not support the proposed full ban on
advance payments and, as outlined previously, believes that the
use of independent third parties for deposit payments would encourage
the growth of the industry. As there is no evidence of a significant
volume of complaints relating to difficulties in obtaining refunds
of deposit payments, OTE is calling for the Commission to review
this proposal.
10. RESALE AND
ADVANCE PAYMENTS
Under the requirements of the OTE code, resale
agents are not permitted to take a registration fee but may make
a charge—paid for in advance of the sale by the timeshare
owner—for advertising. These reputable agents form an important
part of the industry and the Commission's proposal will impede
on their business practices and, ultimately, could make the selling
process more difficult for the timeshare owner.
The fraudulent practice of contacting a consumer
by phone and persuading the owner—generally by making a
false promise that a buyer has been found—to part with a
significant sum of money, is outright fraud and should be dealt
with under existing laws.
11. VIEWS ON
THE PROVISIONS
RELATING TO
JUDICIAL, ADMINISTRATION
AND OUT-OF
COURT REDRESS
OTE believes that the requirements laid out
for judicial, administrative and out of court redress are perfectly
satisfactory and is pleased to note the proposal to set up out-of-court
complaints and redress procedures.
12. SANCTIONS
AND ENFORCEMENT
Without effective enforcement, there is a substantial
risk that consumer protection is weakened and OTE is in full support
of sanctions to deal with companies which consistently fail to
follow the Directive. In terms of sanctions applicable across
the EU, it is clear that this is an area which reflects national
culture and custom. In OTE's view it should be up to the Member
States to decide which sanctions and remedies are applicable in
the case of non compliance with national implementation laws.
13. UNFAIR COMMERCIAL
PRACTICES DIRECTIVE
OTE is pleased to note the direct reference
to the UCP Directive in the Explanatory Memorandum and is confident
that, with proper enforcement, the UCP Directive will go a long
way to tackle aggressive and misleading practices carried out
by the companies that cause consumer detriment.
14. ADDITIONAL
ISSUES THAT
THE DIRECTIVE
FAILS TO
ADDRESS
As previously stated, OTE believes that the
current Directive has worked well and there is no evidence to
suggest that a new Directive is required. There are no issues
relating to timeshare that the Proposal has failed to address.
OTE does not, however, support the proposals covering exchange
and resale.
In the case of Long Term Holiday Products it
is clear that the Proposal would not regulate these travel related
services as rigorously as timeshare. With this in mind, the Proposal
should be significantly improved upon for such products.
30 August 2007
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