Examination of Witnesses (Questions 60-70)
Mr Peter Van Der Mark and Ms Sue McNicol
19 JULY 2007
Q60 Baroness Howarth of Breckland: I
want to come to the timeshare part. I do not doubt that there
have been a lot of people who have been asking a number of anecdotal
rather than Lord Moser-type statistical questions about what it
is that makes people anxious about their timeshare, separating
out the other products which we recognise need more legislation.
First of all, why did you think, when you started your survey,
that the satisfaction levels would be so low, because that says
something about your view of your industry before you undertook
the survey? Secondly, the thing that worries people most is a
lack of clarity of what your code would be. Can we see your code?
I have been a regulator myself and codes have always been transparent.
The problem about your organisation is that you say you are regulating
but in fact you are industry so where is your independence of
any kind in terms of regulation? The key issues that really worry
people are buying something that appears to immediately lose value
the next day they have bought it but they are never told that
at the point of purchase and do not have enough time to discover
that because the timeframes are too short and then discovering
there is no exit strategy; that they cannot sell on because it
has no value and they are continuing to pay. My last question
is you have talked about redevelopment and the fact that the industry
is going into other areas because it is more profitable. There
are a number of Spanish resorts as we know where people have been
frozen out of their timeshares, beach hotel or whatever it is,
in Lanzarote because the company wishes to redevelop it as a lucrative
hotel and that, as you know, is now subject to legislation. I
just wonder how you fit what you said previously into that rather
bleak scenario? That does not mean I do not think there are some
people with good timeshares because I have family who do.
Ms McNicol: In respect of the consumer
survey, for me a lot of it was because of the media perceptions
of timeshare. Although they are improving, one does still tend
to read quite a lot of negative stories in the press about timeshare.
I did go into it with a slight feeling of anxiety but I was very
pleased with the outcome.
Mr van der Mark: I had the same fears
for similar reasons but we also deal with a lot of consumer complaints
and if you deal with complaints a lot you actually think that
the whole world is about complaints. It was good for us to see
the other side. On the question of our Code of Ethics, our Code
of Ethics is publicly available; we have nothing to hide. It has
been developed in conjunction with the European Consumer Centres
and the European Commission, not in any official process as you
have in the UK with the Office of Fair Trading where you have
the official application system, but yet they make 90% of the
comments which were made by the European Commission and the European
Consumer Centres were taken on board in our code. Secondly, we
developed an alternative dispute resolution system upon request
of the European Commission and the European Consumer Centres which
we asked the Chartered Institute of Arbitrators to develop and
administer for us. It is widely available. The ADR system has
not been used simply because we resolve 83% of the complaints
from our members, which are 121 complaints, to the satisfaction
of the customer. The independence of our code is not there; it
is a voluntary code. In the UK, however, we will go to CCAS, the
approval system of the Office of Fair Trading, which means that
we would have to build independent elements into the code and
for the UK we will definitely do that. On the value propositions
of timeshare, unfortunately we see in the media that the people
either believe that they have bought real estate which will grow
in value and then they can sell it on, or they have been led to
believe that during the sales process; other people tell us that
they believed it was an investment with a financial return, but
what our members understand—we asked 5,000 timeshare purchasers
directly after their purchase of what they thought about their
purchase, did they have purchase hesitations and what were their
purchase motivations. Their hesitations were that they did not
like the salesman, high pressure, they did not understand the
contract very well or exactly what is exchange. Then we asked
them for their motivations and they bought anyway. Consumers understood
very well at the sales process what their purchase hesitations
and motivations were and they went ahead with the purchase anyway.
They also understood the value of the timeshare being a consumer
durable. You consume it, you use it over time. To give a recent
example, a timeshare owner who bought in the Costa del Sol 12
years ago for £5,000 and sold it for £3,000, went on
17 holidays, is a very happy customer and feels they had value
out of it. If the customer is expecting, because of house price
increases, that therefore his timeshare will have increased in
value that is just not happening. The reality with buying a timeshare
is that it is like buying a car: you drive it out of the garage
and 20% of the value drops straightaway. It must not be thought
of as an investment. It is a consumer durable; you use it and
you have happy holidays.
Q61 Baroness Morgan of Huyton: One of
the issues we wanted to raise, and which we have already talked
about, is holiday clubs. You were clearly supportive in broad
terms of the 1994 Directive and you are supportive of further
action on holiday clubs. Do you think it is right that they are
included under this Directive? If you think it is right that they
are included under this Directive, do you think that this Directive
is going to be satisfactory and, if it is not, what else should
be done to make sure that the rogues are covered properly? It
may be that you want to write to us in more detail about what
should be included the Directive that is not. Where are the gaps
going to be?
Mr van der Mark: We think this is not
the right Directive to regulate long-term holiday products. It
is the right directive to regulate sales and marketing activity
in general, but then in general much broader than just timeshare.
What we have suggested to the Commission is taking the Doorstep
Selling Directive, the Distance Selling Directive, the Timeshare
Directive and merging them to develop in principle a sales or
fair trading directive on how you actually contract with customers,
whether it is the salesman who initiates the sale. That would
be the perfect situation but that is not the situation we are
in. We would accept this directive, particularly if it focused
rightly on regulating long-term holiday products. However, what
we are surprised about is that it is very flimsy on the long-term
holiday product, it does not have enough body to it, it does not
ask for the right disclosure elements which need to be disclosed
to a customer to understand, for example: We do not own anything.
Can we now have your £20,000? We think if that is disclosed
then no-one will actually buy into it. What we also find very
strange is that 80% of this new Directive is about timeshare,
regulating exchange, regulating resale, regulating timeshare further.
We do not understand that because there are not really complaints.
We would support it if it had been modernising, simplification
and it would lead to a better Timeshare Directive—we have
asked for more things to be included—but it is more of the
same. Will this Directive work? To cut a long story short, it
will have exactly the same problems as the 1994 Directive because
of circumvention, the definitions will always be circumvented
and it does not deal with enforcement because it cannot deal with
enforcement because it is Member State competence.
Q62 Chairman: Can you give us an example
of the other things that you would like to have included in the
new Directive?
Mr van der Mark: I will give you a good
example of what is in the Directive which we find very strange
which is not good for consumers but it seemed to have been put
in to help the timeshare industry. We now seem to be able to ask
a person who has signed a contract and if we make it very clear
in the contract that there is a cost to it and if they cancel
the contract that we can claim those costs, such as for example
notary costs. If you would like to give a hand to rogue traders
then that is the right way of doing it. We are not in the business
of signing contracts and getting £500 for costs; we are in
the business of selling people a timeshare holiday. This is an
element in the Directive which we do not understand. In terms
of disclosure, the disclosure elements are very simple—people
have to pay electricity and all kinds of things—that is
not really material information for the customer. The customer
needs to get a real material understanding of how the system works,
what it does for the customer, and we would therefore suggest
that either the disclosure documents are seriously updated in
conjunction with the industry, because we know what the material
information is and we would like to see more elements of disclosure,
and what we would also particularly like as a timeshare industry
is that regulation is put in place that we can take deposits.
That is something in the UK which is not in the Timeshare Act
and it is not a wish of the UK authorities, but it is a wish of
the timeshare industry at large to be allowed to take deposits
through third parties because we are the only industry in Europe
who is not allowed to take deposits. We understand that that is
probably a bridge too far and we will definitely not say anything
more about that.
Q63 Lord Trefgarne: You have put your
finger on the matter there. Your business has been regulated,
both by Directives and by national legislation, over a series
of years because there were in the past some serious problems.
In respect of the taking of deposits, which you have referred
to, there was a time, as you were just saying with the travel
clubs, where they take deposits and run for the hills. You are
relying on your Code of Practice, which is no doubt admirable,
but you are rather coy about what it contains. Could we see it?
Mr van der Mark: Yes, no problem.
Q64 Earl of Dundee: If this legislation
is going to work properly then of course in the first place there
must be clear information for the consumer. Compared with the
existing Directive, do you think that the new provisions will
necessarily cause an improvement in accuracy and clarity?
Mr van der Mark: No. Unfortunately if
we were to take the advice that we currently have from our legal
counsel it would probably mean that for a multi-destination timeshare
resort, for example, Hilton which has more than one property,
they would have to disclose accurately and appropriately all of
the properties the customer has the right to visit either through
an exchange system or directly through Hilton. That means in our
view that the current Directive would tell us that probably four
or five volumes of yellow pages have to be made available to the
customer detailing literally everything in every resort. That
is not helpful and not material. In other areas, for example,
the disclosure of the management fees, no-one really cares about
the electricity price but someone cares about how the management
fee can increase and that should be in the disclosure requirements,
not simply electricity prices, rates and all the different taxes
which apply. People are interested in the bottom line figure and
how that can change.
Q65 Earl of Dundee: How, then, would
you revise the new provisions as proposed in a user-friendly manner?
Clearly there are these important items which are left out. There
could even be others which are superfluous to the information
needs of the consumer. What would you do about those? And how
would you restructure and express in a more helpful way what is
there now?
Mr van der Mark: A good example is how
we have worked with the Department of Trade and Industry and the
Department of Business Enterprise in regulatory reform in the
past in amending the Timeshare Act in the UK when it came to the
disclosure statements, particularly the cancellation notices.
For a customer to understand and to read something it probably
needs to be a contract of two or three pages and then very clearly
pointed out in that contract the four or five categorical points
which the trader needs to point out to that customer, perhaps
with reference to the more detailed disclosure statements, but
it would be helpful if we are not forced to put in the contract
all the information that we now have to do, which is literally
four volumes, and we should be allowed to put it as an annex to
the contract.
Chairman: We have some important queries
that are coming up now, including questions which Lady Howarth
is particularly interested in, and then there are a couple of
questions about the new Directive.
Q66 Baroness Howarth of Breckland: I
have asked the bulk of my questions but we still need to know
whether there should be a requirement for timeshare and holiday
club traders to register and how the Commercial Practices Directive
will function. If I could have an answer to those two things as
I have covered the other things.
Mr van der Mark: In our view a fraudulent
operator can only be dealt with by the good application of legislation.
The Unfair Commercial Practices Directive was a directive which
we as an industry had really good support from our industry because
it is principle-based legislation. It sets out very clearly what
is misleading and aggressive. It has a black list attached to
it of practices you may not work with. If you could make sure
that the new Timeshare Directive was linked in with that directive
then that would be a very good thing. On top of that we would
also like to see a Fair Trading Directive. Next to an Unfair Commercial
Practices Directive it would be a good idea to have a Fair Trading
Directive also detailing how to interact with a customer. In terms
of available legislation, there is a whole plethora of laws already
in action which can be used today to stop rogue traders, including
the false resale promises or the long-term holiday product. That
is unfair contract terms, because their contract terms are always
unfair, misleading advertising legislation they have breached,
the Distant Selling Directive they have breached, the doorstop
selling they have breached, and sometimes they also fall within
the Timeshare Directive as it is. There is quite a significant
amount of available legislation which simply is not used.
Q67 Chairman: What you are saying is
that there is a lot of general legislation which should also be
applied by regulatory authorities, or the police, whoever is the
correct person according to the situation, applied to the timeshare
and similar product sales. That is what you are saying.
Mr van der Mark: Yes, indeed. The second
question was a normal business licensing system which we have
in Belgium and in Hungary and it works quite well. It works in
Belgium so well that we have no timeshare operators left because
they always get visited by the inspectors rather than looking
at the ones who do not have the licences and operate in the market.
A licensing system is a good way, if it is a normal business licence
system, where you for example deposit your contract and you say
this is the contract I am going to work to, that is the one I
give to the customer and if the customer then complains they can
check whether that was the one that was deposited with the authorities.
To go to a fully fledged licensing and bonding system, as for
example is applicable to the travel industry, for the timeshare
industry would simply not make any sense because our product is
guaranteed by the real estate which is no longer in their hands,
the product has changed hands, but for long-term holiday products
I would suggest that a bonding system would be quite good because
what they offer is discounted travel.
Q68 Baroness Gale: When we have the written
response could you elaborate on why you think it is so important
to have a deposit or an advance payment and why you think there
should be a shorter cooling off period and what are you suggesting?
Mr van der Mark: We think the cooling
off period is fine. We will definitely do that. The question is
to ask any other industry why they like to take deposits?
Q69 Baroness Gale: Because you are tied
in, are you not? You cannot withdraw as easily once you have parted
with your money.
Mr van der Mark: We know that but we
think it has a lot to do with the commitment of the customer on
the day.
Q70 Chairman: If I can sum up what you
have been saying, you have been saying you are not objecting to
regulation. It is not the regulation in itself which is objectionable;
but you would want to see a regulation which will (a) cover some
of the more difficult to control aspects of the sales of holidays
and (b) make sure that the ordinary processes of the law or consumer
protection—different countries have different ways of handling
these things which apply to every industry are also successfully
applied to your industry. You feel the European Commission should
be looking at bringing all this together and applying it to your
industry rather, than trying to find special legislation which
is particularly directed at your industry. I think that is the
point you are trying to make to us.
Mr van der Mark: Indeed.
Chairman: We will take that away with
us and we will look at it and think again. Meanwhile, thank you
very much for being with us today. When you read the evidence
there may be some odds and ends which we did not quite cover because
we had to skip around rather fast towards the end, so if you do
want to add to that you are most welcome to do so.
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