Examination of Witnesses (Questions 160-165)
Professor Geraint Howells and Dr Christian Twigg-Flesner
25 OCTOBER 2007
Q160 Chairman: Some consumers will want
certain things and others will not want the same things. I gather
the lists in the suggestions from the Commission include whether
a property has a sauna. I could not care less whether a property
has a sauna—I never want to go anywhere near a sauna. I
am saying that certain bits of information are more important
to purchaser A than they are to purchaser B, and that is one of
the problems.
Professor Howells: We have all listened
at the end of a telephone line to somebody saying, "I've
got to repeat this to you" and you put the phone on speaker
for five minutes whilst the poor person reads a list of things
off to you and you do not pay any attention to all that. I really
think that is a regulatory burden which is not even doing consumers
any good. I think you have to be a bit careful about your tactics
and pinpointing certain key aspects may be the way to do it.
Dr Twigg-Flesner: You could go one step
further and require consumers to complete a little questionnaire
afterwards to prove that they have understood this information!
You soon get into a very, very difficult paper trail.
Chairman: I think we are going, once
again, into the role of comedy rather than serious endeavour.
Now, the post-sale situation. We are back to Lady Howarth again.
Q161 Baroness Howarth of Breckland: We
are into this question about whether people are really buying
the right to have ever-increasing charges rather than something
that is going to give them pleasure and how we make sure that,
post-sales, people really understand what is happening. People
can suddenly find themselves having to pay and do not know how
to get out of it. We are interested in how the directive should
help to make this clear and take forward some way of people being
able to get out of timeshares. Although they would not want to
lose their investment, we have learned that this is like buying
a motorcar: you buy it and it depreciates pretty rapidly. We would
be very interested in these two issues.
Professor Howells: There was a point
once made to me quite forcefully in relation to the Financial
Services Act, that with these sorts of products you do not know
within 14 days or 28 days whether you really want the product
or not, you know whether you have a good pension in 25 or 40 years
time and it is too late to exercise a right of withdrawal then.
Similarly, with the timeshare: you may well realise you have got
into a product which is going to cost you a lot of money on an
annual basis—which you did not fully appreciate—at
some stage down the line. Also there is, I understand, some concern
that the controls on the costs are not always fully understood
by consumers or properly noted. One way around that might be to
have a very clear explicit warning, in red, that this is a long-term
engagement which may cost you considerable sums of money on an
annual basis, and make consumers realise that. Another and perhaps
a more practical way is to try to make sure that the timeshare
owners have some say in the running of the properties. Many people
live in estates which have a scheme covering some communal area
and people become share owners in that scheme and can decide how
it is maintained, the costs and so forth. It may well be useful
to have an information obligation as to whether or not, when you
are a timeshare owner, you have any control in the management
of the scheme or whether the management and the charging of the
scheme are exclusively in the control of the organisation that
is selling you the property.
Q162 Baroness Howarth of Breckland: What
about the issue of withdrawal and having some capacity for people
to get out of their timeshare at the end of the day. This seems
to be an eternal contract really.
Professor Howells: There is a real danger
that you signup for a contract and it just becomes a burden around
you. You might well say, "I'd like to give the contract up,
even if I don't get any money back. I just want to get out of
this thing at the end of the day." Again, you would have
to ask the timeshare industry how that would impact on them. If
there is a company that has engaged in the long-term management
of the project, then it may not be too great a difficulty to take
some units back and resell them. In fact, it may show long-term
commitment to the project to be able to do so, but I am afraid
I do not know enough about the financing and management of the
timeshare companies to give an authoritative statement on that.
Q163 Chairman: We could ask a supplementary
question of them on that. The last question is rather similar
and that is to do with exchange and how the definitions are going
to impact upon exchange of properties. Do you think it is problematic
in some way or another?
Dr Twigg-Flesner: I think it is just
bad drafting, to be honest. If I take you to page 15 of the proposal,
the draft Article 2(1)(d), if you look at the definition of "exchange",
it is "a contract by which a consumer against consideration"—and
we have mentioned the problematic use of that word—"joins
a scheme which allows him to modify the location and/or time of
his timeshare interest through an exchange." That an exchange
is something you do through an exchange is to me incredibly circular
and tells me nothing. That is something that applies also to the
definition of "trader". They have tried to define a
concept by relying on a concept to define itself and I think that
is problematic. That is just a more general point about the style
of drafting, the quality of drafting of the directive which probably
needs to be improved.
Q164 Baroness Howarth of Breckland: Is
this trying to get at a situation where you have a timeshare which
is linked to a particular property, south of France, Miami, wherever
it is, but that group of property can do exchanges with other
people's timeshares in other parts of the world or in other parts
of the same country? Is that what we are trying to get at in this
particular provision?
Professor Howells: My understanding of
the industry is that there are certain companies set up to act
as an exchange system, so timeshare operators will be linked up
to an exchange company and you will then have the right to bank
your property against other properties. Just some general reading
around the area expresses some concern that maybe what happens
is that some of these companies get all the banked properties
and sell some on the open market and then there is a depletion
in the property available for exchange and people do not get the
property they were expecting. I do not know if that is a real
problem or just a theoretical problem. I think you would have
to ask the industry or the consumer groups about that, but something
that strikes me is that, if I am buying an exchange service—and
I think you pay a fee of about £80 or £90 to be in the
system—and I apply in good time for an exchange and something
that is appropriate to my needs is not there, why should I still
pay that fee? Should I not have the right to get the fee back
and say, "You said I had to notify you by a certain date
in this year if I wanted an exchange. I did that. You were not
able to provide me with the service I wanted, why should I have
to pay you the fee?" If there was a real incentive to get
the fee to make sure the exchange was effectuated, that would
probably solve lots of the problems, because there would be an
incentive on the scheme to make sure there was an appropriate
pool of properties.
Chairman: That is a very interesting insight.
Professor Howells: I think you would
need to check with the industry the facts of how great a problem
that is.
Q165 Chairman: We have a couple of questions
to ask them, perhaps by letter. We are almost at the end of our
time. Does anybody have any further questions they would like
to ask? Is there anything you think you should have told us which
you have not told us? I cannot imagine what it would be. Thank
you both very much for coming. It has been a most interesting
session. It has been very useful for us. We have lots more concrete
appreciation of what is going on at a European level and also
some of your thoughts about the very specific points as well.
Thank you very much indeed for coming before us.
Professor Howells: Thank you for preparing
so well the questions which have provided a nice structure for
the discussion.
Chairman: Thank you very much.
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