Australia’s securities watchdog is reviewing whether consumers need better protection from timeshare companies, after complaints that some use high-pressure sales tactics and misleading product descriptions to lure in unsuspecting investors.
Timeshare schemes usually involve handing over a sum of money – it can be in the tens of thousands of dollars – in return for points that allow you to book high-end hotel rooms and other holiday facilities in the future at a reduced cost. There are usually further annual fees involved, and the contracts can tie you in to paying these sums for up to 80 years. (This style of timeshare is distinct from the timeshare arrangements that involve purchasing an actual share in a property.)
These timeshare deals are considered a “managed investment scheme” under Australia’s Corporations Act, so are regulated by the Australia Securities and Investments Commission (ASIC).
The deals get a bad rap from consumer champion Choice, which calls them “one of the most diabolically clever scams going, one that can bring about a steady drain on your finances with no escape in sight”. Choice says that timeshare scheme operators can attribute an arbitrary value to the points, which means that scheme members may end up paying through points far more than a vacation is actually worth.
Typical consumer complaints are that the price of holidays they were quoted when signing up were then not available when they went to book, that they were put under undue pressure to sign on the dotted line at sales seminars, and that the contracts are unnecessarily complex and difficult to cancel.
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The ABC’s 7.30 program focused on the pitfalls of timeshare schemes in a report this week. It said that Australia had about 175,000 timeshare members and noted that the nature of timeshares had changed dramatically since they were first introduced in Australia in the 1970s.
“Under early schemes, members would pay for access to a particular property for a number of weeks each year,” the ABC said in a report.
ASIC consulted in March on whether the timeshare sector should continue to be subject to the Corporations Act, and as a result of that consultation, decided it would do a further review on the policies around timesharing to see if consumer protection needed to be strengthened.
The watchdog is particularly looking at whether the current ‘cooling off’ period was sufficient – Choice says that period currently runs from just seven to 14 days, depending on the timeshare provider – as well as whether fees and cost disclosures were sufficient, whether sales practices such as hawking – where you’re stopped on the street and convinced to attend a timeshare sales seminar – and the provision of in-person advice to potential buyers were appropriate.
The Australia Timeshare Holiday Ownership Council represents the timeshare industry. Its CEO Laura Younger told the ABC that the sector contibuted almost $700 million a year to the economy and that ASIC should give careful consideration to how changes to the regulation of timeshares would impact the sector’s growth.
Younger told the broadcaster that there was no sign members were unhappy with points-based schemes, saying that there were more than 81,000 Australian members regularly using their points for holidays.
Have you been in a timeshare scheme? Did it work out well for you?