INTRODUCTION
Established in 1989, the Association of Timeshare Owners Committees (TATOC) is a consumer-based association of timeshare owners representatives elected by timeshare owners at their resorts/clubs. TATOC’s objective is to support timeshare consumers by providing resources, assistance and guidance and to liaise with government agencies on their behalf.
At present we represent approximately 250,000 owners from 72 resorts and Clubs in the UK, Spain, Canary Islands, Portugal, Madeira, Malta and Austria. From I st January 2008 TATOC will also take over consumer complaints and representation for UK citizens on all timeshare matters where the resort/company are not members of the Organisaton for Timeshare in Europe (OTE), and to liaise with OTE where they are.
Timeshare is a successful holiday product. A recent independent survey revealed that 96% of owners rate timeshare as better than any other self-catering holiday and 97% of owners rate timeshare as better than staying in a hotel. It is of considerable concern to TATOC that, neither the existing, nor the proposed Directives, give due recognition to the existing 1.45 million timeshare owning families in Europe who are already consumers. It is essential to existing owners that the timeshare industry has long-term security, stability and prosperity. All timeshare owners need the principle features of their investment to be successful, and these requirements include a successful timeshare marketplace, an effective resale facility, and a fully satisfactory exchange facility. Whilst the main focus of the proposed Directive is on potential consumers at the point of sale, the potential impact on the existing 1.45 million timeshare owning families must also be considered.
TATOC welcomes the opportunity to present evidence to the House of Lords regarding the EU Commission’s proposed replacement of the Timeshare directive (proposal COM(2007) 303 final). Our comments on the numbered questions in the Call For Evidence are listed below. Our additional comments/concerns on detailed areas of the proposed Directive are included as an appendix.
1. The rationale for bidding legislation or voluntary agreement?
The 1994 Timeshare Directive (94/47/EC) has been highly effective in providing protection for consumers purchasing timeshare products. In TATOC’s response to the European Commission’s Consultation Paper, we made it clear that TATOC did not support a combined legislation that brought non-timeshare products like Discount Holiday Clubs into the same legislation as timeshare. We still hold this view very strongly, but recognise that momentum and support for the combined legislation is now so great that we must take a pragmatic view, and make a positive and practical contribution to the proposed Directive.
Consumers in the recently emerging non-timeshare products need the same degree of protection as afforded to timeshare owners by the original Timeshare Directive. It must also be recognised that the Code of Conduct and Dispute Resolution Scheme introduced by OTE has had a major impact on improving standards and protection for consumers within those timeshare companies who are OTE members or subscribe to the Code of Conduct. However, not all companies are OTE members or subscribe to the Code of Conduct.
TATOC believes that a combination of legislation and a voluntary code-of-practice with a well recognised industry “badge of quality” will provide the maximum protection for consumers. The new Directive must provide adequate protection to consumers of the newly emerging non-timeshare products, without having a detrimental effect on the legitimate timeshare product and it’s owners.
2. Respective roles of EC law and national law?
TATOC understands that it is the role of an EU Directive to establish a minimum standard of consumer protection to apply across the EC. We beieve tha this is especially important in holiday products which, by their very nature, are often cross-border. It is the responsibility of Member States to produce national legislation to transpose the EU Directives and to provide effective enforcement procedures and sanctions.
3. Strengths and weaknesses of the existing Directive
The existing Directive has been very effective in providing consumer protection on the sale of timeshare products. Evidence of this is seen in the dramatic decrease in timeshare complaints and the drive by businesses to develop products not covered by the Directive. The weakness of the existing Directive is that its scope is no longer sufficient to provide protection for newly emerging holiday products incorrectly described in the proposed Directive as “similar to it” (opening page of the Directive). It must be recognised that legislation alone can never provide protection for consumers without rigorous enforcement by Member States. This failure to enforce existing law has been the major weakness in dealing with the illegal practices of unscrupulous businesses operating bogus timeshare resale companies. More than anything else, it is this lack of enforcement that has caused a loss of consumer confidence in the timeshare product.
4. Scope and definitions of the draft Proposal (Articles 1 and 2)
It is made clear throughout the proposed Directive and associated papers that the perceived problems in marketing are not related to the genuine timeshare product. It remains TATOC’s concern that bringing non-timeshare products within the scope of a Directive bearing the name of “timeshare” will prove detrimental to the genuine timeshare product and its owners.
It is our view that the proposed Directive takes too “heavyweight” an approach in addressing timeshare exchange facilities, or indeed that any real or quantified problems exist in this area. We believe the requirements of the Directive on timeshare exchange to be unnecessary and unworkable. Please see appendix paragraph 4 for further comment.
On the matter of resale companies, the vast majority of problems are a direct result of the illegal activities of unscrupulous companies and the only real method of removing this problem is the rigorous enforcement of existing laws by Member States. Without this action there will be no additional benefit from any provision in the new Directive to address resale.
TATOC fully recognises and supports the need to introduce legislation to provide consumer protection on the new long-term holiday products that lie outside the definition of timeshare within the current Directive.
The definition of “timeshare” within Article 2 (la) is inadequate to correctly identify the legitimate timeshare product, and to differentiate it from non-timeshare products where the consumers benefits are not guaranteed against any identifiable assets or right of use of holiday accommodation directly owned by the consumers or held in trust. See appendix paragraph 1.
5. Information provision and advertising (Article 3 and Annexes)
For ownership at fixed timeshare resorts, TATOC supports the extended disclosure information detailed in Annex 1 and 2. However, we are most concerned about the opportunity described within Article 5 paragraph 5 for marketing companies to have the opportunity to levy and enforce a charge for cancellation of the contract during the cooling-off period. Whilst recognising that the existing Timeshare Directive contains a similar provision, this does provide an opportunity for unscrupulous companies to make considerable and unjustified profits from members who withdraw from their contract. We press very strongly for this opportunity to be removed.
We are concerned that the requirements of Annex 1 would be wholly impractical for flexible or points-based timeshare companies where the portfolio of products can be very extensive. It is quite impracticable for a marketing company to provide, or for a consumer to absorb, such quantity of detail in such cases. For example, it is not uncommon for there to be ten or more resorts in a single portfolio and provision for this must be built into the proposed Directive. See appendix paragraph 7.
We are concerned that the requirements of Annex 3 (long-term holiday products) are insufficient to provide adequate protection to consumers. The dangers of such products are not adequately revealed by the requirements of the Directive, while the sheer volume of information may give a purchaser a false sense of security. Marketing companies should be required to provide full details of the product, and a full description of the assets whether real, rented or contractual upon which the product is dependent. See Appendix paragraph 2.
There is additional information TATOC feels would be highly beneficial to purchasers of Timeshare and LTHPs that should be included in Annexes 1 and 3. This is described in Appendix paragraph 3.
TATOC supports the focus of the proposed Directive onto resale companies, but is concerned that Annex 4 introduces considerable confusion and anomalies that must be resolved. See appendix paragraph 5
6. How can consumers generally be best informed about their rights in relation to this directive?
There are two aspects to this question. First, there is a need to bring information about the introduction and purpose of any new Directive to the attention of the general public. TATOC would support an intensive media campaign by Member States, and would welcome the opportunity to work with the OFT, DTI or any other government agency on this matter.
Secondly, there is an essential need for potential timeshare and LTHP purchasers to be particularly aware of this Directive, together with any other relevant Directives such as the Unfair Commercial Practices Directive, and the national legislation that implements them. TATOC recommends that the disclosure information. (Article 3 (2) and Annex 1 and 3) be extended to include a legislative summary making reference to relevant Directives and national legislation.
7. How satisfactory for consumers are provisions for withdrawal (Article 4(3) and Article 5)?
The right of withdrawal, together with a ban on deposits, have been the two fundamental aspects of the existing Timeshare Directive that introduced much needed consumer protection to timeshare purchases. It is essential that the disclosure information referred to in Annex 1 (m) contains the full and detailed information as described in article 5 of the proposed Directive.
The right of withdrawal hinges on pre-contractual information being provided in writing (Article3) and a written notice of withdrawal (Article 5) being “dispatched” before the deadline expires.
There are many examples where disputes have resulted from disagreement about withdrawal notices being sent or the date on which this was done. To limit the possibility for such disputes, the pre-contractual information should also include guidance on any requirements within the contract or national law for a consumer to demonstrate the sending of a withdrawal notice.
8. To what extent does the Directive achieve a more consistent regime across Member States?
TATOC is in full support of a harmonised approach across Europe, especially because the nature of timeshare is one of a cross-border business. A harmonised cooling-off period of 14 days is a specific example (Articles). We are concerned that confusion could result, both to marketing companies and to consumers, if member states substantially modify the requirements of the new Directive within their national legislation. Article 1(2) limits the provision for more stringent requirements to the right of withdrawal, which should minimise the danger, but even so it is TATOC’s view that a common application of the directive in Member States will result in less confusion for consumers.
9. How can consumers be best protected from demands for advance payments?
As indicated in 7 above, the ban on deposits has been a fundamental element of the consumer protection introduced by the existing Timeshare Directive. TATOC strongly supports the ban on deposits to continue. However, a number of member states currently allow a process of deposit taking by independent third parties, a procedure which Article 6 (1) and (2) prohibits. This may have a detrimental effect on timeshare sales within these countries. Before closing the door on this procedure, TATOC would welcome a study to establish whether a third-party procedure can be identified and regulated that would provide the opportunity for third party deposits without weakening the consumers undisputed right to a return of monies on withdrawal from the contract under the provisions of the Directive.
10. How significant a problem for consumers have advance payments been in the resale market?
This has been the most significant consumer problem in the area of resales. There have been a large number of companies contacting timeshare owners and requesting advance payments for a variety of reasons, many claiming to have a buyer already waiting and willing to pay an attractive but inflated price. The vast majority of consumers never achieved a sale and never saw their money again. These illegal practices will not be prevented by any provisions within a new Directive. The answer to this problem lies in identification and rapid, rigorous enforcement of existing laws.
The new Directive (Article 6(2) provides that no payment, guarantee, reservation, etc may be taken by a resale company (or third party) prior to completion of the sale. However, the timeshare industry and its consumers needs to have an active, reputable resale marketplace in operation for the benefit of consumers who may no longer be able to utilise, or perhaps not afford, the ongoing cost of their investment. A total ban on all payments prior to completion of a sale is too simplistic an approach, and will result in further stagnation of the resale market and a resulting disadvantage to consumers. Reputable resale agents incur costs in advertising timeshare properties for owners. TATOC would welcome a study to consider whether Article 6(2) could be safely revised to allow for a small, reasonable and detailed charge to be made by registered companies.
Please see appendix paragraph 5 for further recommendations on resale.
11. View on sanctions imposed by member states for infringement of the current Directive
The provisions of the Directive appear satisfactory, but TATOC’s concern again remains one of there being an adequate commitment to investigation and enforcement.
12. View on the level of sanctions imposed by Member States in enforcing the current Directive
We do not have sufficient information available to comment on the number or effectiveness of actions brought for infringement of the current Directive. However, the overwhelming impression is that there has been few actions brought against offenders under the current legislation. This may be testament to the effectiveness of the Directive, but may also be due to the limited scope of the directive and the moves to develop products that lie outside of its protection.
The phraseology of the Directive in Article 11 (2) is encouraging, ie that sanctions should be “effective, proportionate and dissuasive”. If possible we would add “timely”, “punitive” and “rigorously enforced” to this statement.
13. Relationship between the proposed Directive and the Unfair Commercial Practices Directive
The expanded scope of the new Directive will introduce much needed consumer protection, much of which lies outside of the core timeshare product itself. It is TATOC’s view that this extended scope will be well complimented by the provisions of the Unfair Commercial Practices Directive in further regulating the activities of companies operating within the provisions of the new Directive
14. Significant issues in the timeshare market that the proposed Directive has failed to address
Please see appendix for TATOC concerns on:
- — Areas not addressed.
- — Areas where the proposal will not provide adequate protection or may have missed its intended “target”.
- — Areas where there would be serious practical difficulty in implementation.
ADDITIONAL COMMENTS ON DETAILED ASPECTS OF THE PROPOSED DIRECTIVE
1. Definition of timeshare
The definition of timeshare in Article 1 (a) of the proposed Directive does not capture the essential factor differentiating timeshare from other Long Term Holiday Products (LTHP). Timeshare ownership is based on clearly defined holiday properties for which owners have a long-term right of use that is directly owned by them or held in trust on their behalf If the Directive is to incorporate different requirements for timeshare and LTHPs the distinction between them must be more clearly defined. We would propose the definition of timeshare be extended to include a phrase:
the right to use one or more clearly defined accommodations where the long-term right of use belongs to an individual owner or group of owners, or is held in trust on their behalf.
In addition, the statement in paragraph 1 of the first page of the proposed Directive that “new products similar to (timeshare) have appeared on the market” is incorrect and misleading. The newly emerging long-term holiday products designed to circumvent the 1994 Timeshare Directive are nothing what-so-ever like timeshare except, perhaps, that the aggressive sales techniques that gave timeshare it’s original bad name have reappeared on these new products. The statement that the two products are similar is detrimental to the image and perception of timeshare and should be removed.
2. Disclosure information for LTHPs
Annex 3 should require more detailed information for LTHPs to clearly indicate to buyers the precise details of the accommodation and any other benefit being offered, including it’s ownership and any security of ownership or right of use by the company, for the services being offered over the time period. The requirements placed on timeshare products in Annex 1 are far more extensive and demanding, yet it is consumer protection in LTHPs that has been a principle driver behind the new Directive. The requirements of Annex 3 are inadequate to substantially improve consumer information or to provide adequate protection for purchasers of LTHPs.
3. Additional information required in Annex 1 and 3
There are many reasons why an owner may no longer wish, or be able to, continue to enjoy the benefits of their holiday product. It is TATOC’s view that information should be included in Annexes 1 and 3 to detail the procedures, requirements, limitations and costs of transferring ownership, and of resigning from the ownership should this prove necessary.
The detailed operation, rules and costs applying to a particular timeshare resort or LTHP can change from time to time as described within the Constitution or rules governing the detailed operation of the ownership. It should be made clear to potential consumers that the information presented in Annex l and Annex 3 are only applicable at the time of signing the contract, and may change thereafter. The rules governing such changes should be described.
TATOC also believes it would be helpful to potential consumers if Annex 1 indicated whether a particular timeshare resort or club had an elected Owners’ Committee and how to contact this organisaton.
4. Exchange facilities
TATOC is concerned that the requirements of Annex 5 demonstrate a lack of understanding of how timeshare exchange facilities operate and would be impractical and unworkable. For example, the largest exchange company RCI, on which the majority of timeshare owners depend for their exchange facilities, has access to more than 3,000 resorts. The requirements of Annex 5 (c & e) in many cases do not apply or would be impractical to provide for 3,000 properties. Paragraphs i to m do not generally appear applicable to exchange companies or the timeshare exchange environment.
Other exchange companies, for example Dial an Exchange in the UK, offer exchange facilities to owners who “bank” their ownership in exchange for others where the exchange company has no direct contract or relationship with the particular resort.
In addition, the right of withdrawal (Article 5) and the advance payments (Article 6) do not apply well to exchange companies because of the essentially different service such companies provide compared to the actual sale or resale of holiday products. It is TATOC’s view that a complete revision of Annex 5 and how exchange facilities fit into the Directive is essential.
5. Resale
TATOC supports the focus the new Directive brings to resale companies. However, we are concerned that paragraph e of Annex 4 makes provision for resale companies to make a charge for withdrawal from a contract. We are concerned, as we are with the same provision in Annexes 1, 3 and 5, of the proposed Directive, that this facility could be abused by disreputable companies and we would prefer to see this opportunity removed.
Article 3 (3) places the onus to provide a purchaser with the information in Annex 4 on the resale company. This task may be extremely difficult, if not impossible, for the resale company to deliver and to be sure that the information is up-to-date. We recognise the need for a purchaser to have access to all relevant information but the practicalities of delivery must be given further consideration or the onerous task placed upon the resale company may be an impossible burden and will further stagnate the already difficult legitimate resale market. This will greatly disadvantage consumers and, in particular, will work to the great detriment of aging owners or others who, for whatever reason, may find themselves in urgent need to sell their timeshare.
Article 6 paragraph 1 refers to a ban on “advance payments” within the cooling-off period while Article 6 paragraph 2 refers to a ban on advance payments until the actual sale has taken place or the resale contract is otherwise terminated. In principle, we cannot see any justification for an “advance” payment when a sale has been completed, nor do we understand the concept of an “advance payment” when a contract is terminated.
This confusion about advance payments for resale activity can only act against the consumer in one of the most important areas the Directive has set out to address, and this must be clarified.
6. Resort Constitutions
The majority (if not all) of timeshare resorts or Clubs are based upon a published Constitution to which owners and the timeshare company agree to abide and which forms part of the contract between the two parties. The Directive gives no recognition to these Constitutions which provide much of the requirements of Annex 1 and far more. Annex l should be extended to include any such Constitution or other legal agreement binding the owners and supplier.
7. Flexible timeshare ownership and points clubs
There is a growing trend within timeshare for owners to purchase a flexible type of ownership which provides for a range of holiday accommodation without the need to utilise an exchange company. This may take the form of owning one or more weeks within a specific time period at a range of specific resorts within a management group, or ownership of a number of holiday “points” which can be used to obtain accommodation at a large portfolio of accommodation.
In such cases many of the paragraphs in Annex 1 do not have a practical interpretation and Annex I must be revised to incorporate these products.
10 September 2007
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk