In part one we explored the history of the timeshare and why so many Brits have been tied into unlawfully sold contracts that they are desperate to get out of.
Here, with the help once again of Gary Smith, CEO of Mercantile Claims and Praetorian Legal, we analyse how many people have successfully escaped these agreements and whether the timeshare mis-selling scandal is on the scale of PPI.
How difficult is it to get people out of unwanted timeshare contracts?
Some 500,000 Brits are thought to be tied into unlawfully sold timeshare contracts, with many eager to escape as soon as they can.
“It’s difficult to put a number on how many people have actually successfully escaped their timeshare contract and what makes it more difficult to answer is that timeshare resorts refuse to agree to a termination, or, in many cases, engage with any company like ours who challenge them,” Smith says.
“However, over the years, consumer protection laws have changed and developed and, in many cases, we can rely upon statutory and regulatory laws to assist timeshare owners in resolving their timeshare nightmare.”
There’s still a great deal of confusion and misinformation to contend with, though, that is being actively disseminated to timeshare owners from the very people who once sold them their timeshares, Smith claims.
“Over the past five years and since the slowdown in timeshare sales, the sales reps that were once telling people to actively buy timeshare are now chancing their arm as timeshare termination specialists,” he explains.
“The more sinister side of all of this is that these former timeshare reps are contacting people unlawfully from data stolen from the resorts they once worked for.”
This means that timeshare owners are being unlawfully cold-called by these sales reps and being offered their services. “This often culminates in these cold callers gaining the owner’s confidence as they did when selling them a timeshare and telling them untruthful and incorrect information.”
Smith adds: “One may say that the simple solution is for owners not to engage with the cold callers. The tactics used by cold callers, however, are designed to immediately put an unsuspecting owner into a state of doubt and confusion and these predatory callers are experts in doing just that.”
The other major problem with timeshare termination is that the documentation held by the timeshare owner is the only tangible documentation available.
“In the majority of timeshare sales completed, many were done so on a deception and the documentation does not take into account the lies and promises made by the timeshare resort sales reps at the point of sale.”
The way timeshare was mis-sold is not reflected in the paperwork, Smith argues. “If you look at the documentation owners were given at the point of sale to get them to sign, it’s difficult for any court, whether that be in the UK or Europe where there is a jurisdiction, to take on these types of arguments after the original agreement was signed years ago.”
After reviewing hundreds of timeshare agreements over the past six years, Smith says the common theme is that what is written within the agreement is not a true reflection of what was said and done at the point of sale.
“Timeshare owners were put under extreme pressure to enter into an agreement on the day of their presentation with the added burden of entering into finance agreements with high interest rates on the premise of refinancing at a later date.”
Smith says he doesn’t know the wider picture or what other firms have done, but Mercantile Claims and Praetorian Legal have 8,000 customers on their database and 90% of them have had a successful timeshare termination resolution.
Is it as bad as the PPI mis-selling furore?
Smith says it’s hard to know, ‘but pro-rata for the amount of timeshare sold and mis-sold - in respect of the amount of PPI sold - I would say yes’.
“The majority of timeshare owners will agree that they have had some good holidays out of a timeshare, but what they will also say is that it’s something they never intended to purchase,” Smith says.
Timeshare ownership was never properly explained to them, and in the early days of timeshare no-one could have predicted with any certainty what the long-term effects of owning a timeshare would be.
“In our experience, 75% or more of timeshares we have come across have got an element of mis-selling involved in the sales process. This comes down to two things. Timeshare owners were systemically pressure sold and they were told many untruths to entice them into purchasing.”
Another tactic deployed by resorts, Smith says, is where a disgruntled owner complains about their timeshare agreement being mis-sold. The resort will then invite them to attend the resort to talk over their grievances with a view of resolving the problem.
They will pay for the owners to stay at the resort for a week and during that time the owners will meet with a resort representative.
“The owners will express their dissatisfaction and the resort representative will suggest a solution and this, generally, will inevitably lead to the owners parting with further monies to correct the things they are complaining about,” Smith says.
“The whole process is a complete nonsense and just a money-making opportunity gained from a complaint. It is not uncommon for timeshare owners to have spent upwards of £250,000 on timeshare mis-selling over many years of riding the timeshare ‘upgrade merry-go-round’.”
What is the current state of the timeshare market in the UK?
Timeshare has always been a hotbed of controversy, Smith argues, because of the way it is sold.
“In the early days, the concept of traditional timesharing did work for many people but with the change in people’s holidaying habits and choices, the model has been superseded by the all-inclusive holiday market.”
Smith says the choices of travel and destinations worldwide have sounded the death knell for holidaying once a year at the same time at the same resort, year in, year out.
“The need to rid of the financial burden of timeshare is now the priority for timeshare owners. The talking point is now about the owner’s experiences when they bought timeshare. There has definitely been a rise in negativity surrounding timeshare.”
What has compounded this negativity, Smith says, is the many unworkable timeshare-related products that have been thought out by the resorts to rescue a failing industry.
“These include the selling of timeshare points, fractional timeshare and floating weeks, to name just a few, that have proven totally unworkable as a poor substitute for the traditional timeshare concept.”
Would he ever advise someone to take out a timeshare now? “The short answer is no. Modern-day timeshare is a variation on the traditional concept and is now predominantly a points-based or fractional product.”
The problem with a points-based timeshare product, he argues, is that the owner has no defined right to accommodation, meaning that the resorts have total control over allocation of accommodation and availability.
An owner could buy an allocation of points without any guarantee of ever getting the accommodation and dates that they want, when they want them.
“Compare this with an alternative travel booking experience either with a travel agent or by doing it yourself and being able to see at glance if your holiday dates are instantly available,” Smith says.
“It begs the question - why would anyone want to pay yearly fees to have access to a timeshare where there is a risk that you are unlikely to obtain a holiday of your choice at the time that you want it?”
Are there reasons to be optimistic?
“Throughout our six years of trading we have always tried very hard to manage and exceed our customers’ expectations and have fought hard to protect them,” Smith insists.
“However, as the only timeshare termination companies in the UK to be awarded the FCA’s approval based upon our ethical and professional business practices, we will continue to gain traction against the mis-selling of worthless timeshare products.”
After four years of hard work with the Financial Ombudsman Service representing hundreds of clients, Smith says the hard work has been rewarded.
“In February 2020, we received determinations against timeshare resorts, Club La Costa and Diamond Resorts, which have been involved in the mis-selling of fractional timeshare. The basis of these determinations is that the Financial Ombudsman Service has sided with us and determined that fractional timeshare has been mis-sold as an investment where the product is ostensibly worthless.”
This determination has resulted in the Financial Ombudsman Service ordering that timeshare owners be put back into the position they were in had they not purchased the timeshare.
“Which means that all monies paid to date is returned to the timeshare owners with the addition of simple interest (8%). They also order that any maintenance fees are refunded to the timeshare owners also with the addition of simple interest (8%) and finally that the timeshare is terminated with immediate effect,” Smith says.