Factoring is probably a word which alludes to most timeshare consumers, however, it could be a useful consideration in respect to Consumer Credit 1974 section 75 claims.

When a consumer engages with the timeshare salesman and decides to acquire a timeshare product, very little is done in respect to checking whether or not the consumer (in reality) is good for the money –  i.e. is able to discharge the loan and interest in accordance with the terms of the particular contract which is offered.

Moreover, the sales process (in respect to getting money) of timeshare sales to consumers is so fast, the lenders cannot possibly check whether or not the borrower has (in the past) failed to abide to the terms of past contractual obligations.

When you consider that the lenders are on the hook for the value of the entire contract under section 75 of the Consumer Credit Act the puzzle becomes even more befuddling

We all have at some time in our lives been to the bank or car loan company and have enquired about the possibility of opting for finance to assist in a purchase of something or other. The hoops which consumers are ask to jump though and the hurdles to climb over are quite arduous at timeshare yet when dealing with signing up for finance with a timeshare company the transaction is so quick, so easy and so successful that you have to wonder what the timeshare sellers are doing which other lenders are not.

Is there an underlining mechanism which is at play.? You would think that the enterprise lending the money and exposing itself to the possibility of future claims would protect its self against adverse events which would affect its profitability. To just lend and lend money without these back ground checks would be a folly and an attract of a risk which could not be courted by any professional lending institution.

The only possible way of doing this is to have in place a guarantee arrangement between the Seller and the financial institution which lends to the consumer.

The process would have to be via a factoring arrangement, in that when a seller makes a sale to a buyer and that buyer signs up for a loan, the amount of the loan is paid directly to the seller by the loan company who in reality is not visible in the sale proceeding and presentation. This transaction will be by a factoring arrangements and a factoring account which will facilitate the post contract event.

Therefore this account will permit funds to be paid into it and funds to leave it. The leaving funds are of particular interest as in the event that a section 75 claim is successful by a consumer the money is repaid by the selling enterprise to the lender by way of contra. This will ensure that the normal checks will be mute as the loan is subject to an underlining form of guarantee.

This raises an important issue in respect to whether the incoming moneys (which are paid to the seller) are in fact loans which discharge a particular liability or contra’s which are used to discharge previous liabilities generated by a historic disgruntled timeshare consumer. The question therefore is has the money been lent to the timeshare consumer or was it never lent in the first place and is a mechanism to contra of past liabilities of the seller?

If that is the case then as the money was never sent to the seller and the consumers have no liability to discharge any of the purported loans. The loan is merely a recycling of debt which the seller has with the lender.

If this is happening then the right and just mechanism would to assign the debt not to recycle it through a factoring account.

The way to correctly determine this is by way of a pre action disclosure and a refusal to pay the loan until such time as the lender has proven that the money (borrowed) has in fact been paid. If it hasn’t then no liability could exist.

Last modified: June 25, 2018