What’s wrong with the timeshare holiday points industry?

By Trudie Broekmann Time of article published Jan 21, 2017

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The National Consumer Commission recently released details of the public inquiry that it is about to launch into the vacation-ownership industry, also known as holiday timeshare. The inquiry, which will take place over six months, will be conducted by a panel of experts and chaired by a retired judge.

Why all the fuss?

There might be a few happy owners of holiday timeshare, but if they knew the exploitative nature of what they have bought into, I believe they would change their minds. Why do I say this? I am an attorney specialising in consumer protection law. Last year, I was approached by no fewer than nine clients who wanted to end their relationship with holiday timeshare providers.

I have encountered the following problems with the holiday timeshare industry:

• What consumers buy seems to be worthless. All that consumers receive in return for their points is something they already have: the right to make a booking at a holiday destination. Points are regularly offered on Gumtree for free or for far less than the purchase price. Yet timeshare providers sell points for substantial amounts: my clients paid between R36 000 and R150 000. I have invited Quality Vacation Club (QVC), Vacation Recreation Services, African Club Innovations and MultiDestinations Club to provide me with proof that the points (or units or rights) have value, but, to date, no such proof has been forthcoming.

• Misleading marketing. Providers use vigorous direct marketing campaigns to persuade consumers to buy into holiday timeshare schemes. The Consumer Protection Act (CPA) prohibits suppliers from using marketing techniques that mislead consumers. My clients complain that they entered into contracts under various misconceptions, such as that the contracts would not be valid “forever”, that they could book accommodation at any time of the year, including school holidays, that accommodation would be available at the resorts of their choice, and that they would be able to sell their points for at least the purchase price. In terms of the CPA, if a consumer was misled by marketing, the resulting contract is void.

• Non-delivery of services. The vast majority of my clients are usually unable to obtain a booking. Between 2012 and 2016, one client managed to secure only one booking, despite regular attempts and owning points for which he paid R150 000 – and then he was unable to take the holiday because of pressure at work. Consumers are unable to secure bookings, because the booking systems are often set up to dissuade consumers from accessing accommodation. I suspect this is because providers do not have sufficient accommodation. I have invited QVC, MultiDestinations Club and African Club Innovations to provide me with proof that they do have enough accommodation to meet demand, but they have not responded.

• One-sided contracts. Struggling through the fine print in the contracts that my clients sent me strained my eyesight and severely tested my patience. These contracts are long, inordinately complicated and set out in a series of documents that do not properly relate to each other. I have yet to see a set of contracts that even remotely complies with the CPA’s requirements for contracts to be in plain language and for clauses that place risk on the consumer to be drawn to the consumer’s attention. This non-compliance alone renders the contracts void.

After the CPA came into force, some timeshare providers structured their contracts as credit agreements, presumably in an attempt to avoid having to comply with the CPA. Although the CPA does not apply to credit agreements, it does apply to the goods and services that are the subject of the agreement, namely, the points, the underlying accommodation, the management of the fees, the processing of bookings and the administration of contracts.

• Unfair tactics. I have encountered at least one timeshare provider that makes it impossible for consumers to book accommodation far in advance. If you phone the call centre in September and ask for a booking the following year, you are told that the booking schedules are not yet available. But the contracts require consumers to book well in advance if they want to secure accommodation on the dates of their choice. This amounts to breach of contract, which entitles consumers to cancel the contract.

Some of my clients have been harassed by timeshare employees when they try to cancel their contracts. What usually happens is that the timeshare provider suggests that they sell their points using resale agents, who, in turn, try to convince the clients to give away their points.

In my experience, the providers’ in-house legal counsel “stonewall” consumers who want to cancel their contracts, or try to convince them to accept a holiday booking instead of cancelling. They also seem to be unfamiliar with the CPA.

• Contracts in perpetuity. Contracts are structured so that they continue until the consumer dies, or even bind their descendants. This is unfair on consumers who want to end a contract because they are about to emigrate, or because they can no longer afford the fees, or because they have school-age children and cannot get a booking during the school holidays. In my view, a holiday timeshare contract in perpetuity is unjust and unreasonable, and consequently void.

• Non-compliance with the law. The contracts should conform to the requirements of the Property Time-Sharing Control Act, but none of the contracts I’ve read does. The contracts and the industry’s practices regularly breach a number of sections of the CPA. These sections pertain to overbooking, the quality of service, fair marketing, exclusion from access to goods and services, and the safeguarding of consumers’ money.

Remedies for clients

The contracts of nine clients I examined turned out to be void in terms of the law. This meant I did not have to cancel them, although there were sufficient grounds to do so. In such cases, a consumer does not have to pay a cancellation fee, or pay the management fee upfront, before he or she is permitted to cancel the contract or rely on the voidability of the contract. 

Even contracts that predate the Consumer Protection Act (CPA), which came into effect on March 31, 2011, are regulated by the CPA in terms of a recent decision by the National Consumer Tribunal, if the “cause of action” occurred after 2011.

In any event, the goods and services supplied to consumers since March 31, 2011 are governed by the CPA. 

More importantly, the law provides my clients with the right to have all the money they have paid to the timeshare providers reimbursed if we take them to court. I am considering initiating a class or joint action on behalf of my clients.

• Trudie Broekmann is a Cape Town-based commercial, corporate and consumer lawyer.

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