Timeshare trap: Choice calls on ASIC to throw the book at dodgy holiday schemes

Dodgy timeshares are costing Aussies big money and trapping them in decades-long contracts paying off “poor value” products, with new reports showing that vulnerable retirees are among those stuck in contracts their children may end up inheriting.

Consumer advocacy group Choice is calling for urgent action from the Australian Securities and Investments Commission (ASIC) to regulate timeshare schemes and investigate reports that vulnerable retirees, who bought into long-term accommodation deals in the 1980s and ’90s, are being rorted by providers and have no way out.

The group has launched a “super-complaint” to ASIC about the timeshare industry, which alleges at least eight industry-wide potential breaches of the law, including the use of high-pressure sales tactics and the addition of exorbitant exit fees, which make it virtually impossible to get out of the contracts. 

Choice has investigated a range of horrifying examples of retirees locked into holidays deals that won’t end for 99 years, including the case of a 69-year-old couple trapped in a Classic Holidays scheme until 2076, and a 66-year-old woman trapped until 2084. Sadly, these are just two of hundreds of Australians desperate to end their contracts. 

Timeshare schemes explained

Choice described timeshare schemes as “complex financial products that grant people access to holiday accommodation for a set period of time”. There are two main types of timeshare products. In the first, a ‘title-based scheme’, a person enters a contract that grants them use of a specific property for a set period of time, with contracts lasting up to 99 years. This type of timeshare is no longer sold in Australia, but Choice said there are some legacy contracts remaining with people still unable to exit. 

The second type of scheme is a ‘point-based timeshare scheme’, where members buy and redeem points for holidays at specific resorts and accommodation. Commonly the person would buy a membership worth — for example — 6,000 points a year for $30,000. But they also have to pay annual fees and costs and often have contracts up to 60 years in length, meaning people could be forking out as much as $450,000.

Choice findings

On Tuesday, Choice issued a report painting a damning picture of the industry, finding that of 356 people surveyed almost 30 per cent wanted to exit their contracts, while one in five said the sellers misled them. Choice alleges the companies have used coercive sales tactics, misleading financial information and locked people into contracts that are virtually impossible to exit. Exorbitant exit fees are often charged if someone does want to leave, with Choice reporting one incidence where a person was asked to pay $29,000 in fees just to switch to a shorter contract period. 

Between December 2020 and January 2021, Choice collected data from timeshare members about their experiences, finding that 70 per cent expect that the timeshare scheme’s ongoing cost and debt will be passed on to their children. Choice said this tactic of telling people the debt would be transferred to their children was “misleading and deceptive conduct”. 

Megan Lewis is one such person dealing with the consequences of a timeshare. Locked into an 80-year holiday scheme, Lewis says she was told they could sell the timeshare if they were unhappy, but she’s since learnt she’d basically have to “give it away”.

“We’ve looked into it and there just doesn’t seem to be a way out,” she said. “You’ve got the membership for like 80 years and you can leave it to your children. It sounds good in theory but I don’t want to saddle my daughter with this thing when she’s grown and just lost her parents.

“It adds so much stress to our lives that we just didn’t need, and with the money we’ve spent we could have booked overseas vacations… we could have stayed where we wanted to stay — not just where was available.

“I feel very mislead, and really I can contain my frustration a lot better than my husband does … it’s caused so much tension in our marriage.”

Karen Borowinsky is also locked into a timeshare holiday scheme but says she and her husband “gave up” trying to find a way out. “I don’t want our children embroiled in it all. They use it as a benefit that you can leave it to your children… but it’s not so much leaving the holidays, it’s that yearly debt,” she said. “You know, 15 years later and you’re thinking… this is never-ending, this is seriously never-ending.”

Choice said timeshare schemes are often “incredibly poor value” and “very seldom” in the person’s best interests. In 2018, Choice found that some timeshare contracts are more than 938 per cent more expensive than booking directly online.

Action

Choice has been urging ASIC to make changes to the industry since 2016. They’ve issued four written complaints about the potentially illegal conduct and allege there are so many breaches of the law that it questions whether the timeshare industry should be allowed to operate with its existing business practices.

Most of the timeshares were purchased between 30 and 40 years ago, before the introduction of new buyer protection policies, but Patrick Veyret, Choice’s banking policy expert, said the federal government needs to direct an inquiry into the industry with a view towards regulatory change to assist consumers.

“The timeshare industry is causing deep harm to people through high-pressure sales tactics, poor financial advice and terrible value products that trap people for multiple decades,” he said. “Many people are stuck in unfair and expensive contracts running for decades, and being told by the timeshare provider that they need to pass this burden on to their children. 

“Choice has launched a super-complaint to ASIC on the troubled timeshare industry in an effort to get the regulator to take these matters seriously. We’re disappointed and frustrated by ASIC’s limited enforcement action while people are struggling with timeshare products.

“Choice is also calling on a Federal Government inquiry into the timeshare industry, focusing on people stuck in legacy products. The Federal Government needs to find ways to help people trapped in old-style timeshare schemes with few practical ways out.

“ASIC has the power to act against unfair and predatory practices in the industry, they need to use it.”