Timeshare holidays have been around for years and in many instances they are a very good deal.
For example, I own timeshare at the Vacation Club at Sun City. One year, my one week there got me two weeks at a ski resort in Switzerland via a swap through the RCI timeshare exchange system.
Unfortunately, there have also been some major timeshare scams. One of the bigger ones involved Holland Moorehouse, which disappeared without providing the promised holidays.
Most of the more recent scams have involved the points system of timeshare. With the points system, you do not buy into a particular resort, but you purchase points for holidays at various resorts. The points system companies buy resorts, or buy into resorts (that is, a fixed number of units) or they hire units from resorts.
Research I did a few years ago showed that, on the whole (but not necessarily always), you got better value for money by buying into a resort and then using RCI if you want to stay somewhere else.
My one problem with RCI is that it never seems to be able to book you into one place for more than a week. I suspect this may have something to do with the fact that it charges for each booking. So booking you into three different venues over three separate weeks provides RCI with more income than three weeks at the same venue.
I am raising timeshare again because:
- Personal Finance has received a number of queries about an Australian multi-level marketing outfit called the Business Club, which is now very active in South Africa. The Business Club sells a points timeshare product called the Holiday Club.
- Readers have complained that the points system does not meet their expectations or does not provide suitable accommodation at convenient times.
- Manie van Schalkwyk, the Credit Information Ombud, says his office is seeing an upswing in consumers being listed at credit bureaus for non-payment of timeshare or holiday club purchases.
Most points timeshare contracts commit you to paying for the points for holidays for a number of years. You must still pay if you do not take a holiday. And pay you must, even if you do not like the look of the venues on offer. This is a major complaint about the points system - namely, many of the venues are poorly situated or are of poor quality, while the better resorts are seldom available at convenient times.
Van Schalkwyk says: "Unfortunately, most of the consumers who come to us for help with timeshare or vacation club issues are, in fact, victims of their own inability to read the contracts that they happily signed when offered 'free' holidays or other benefits.
"People go along to presentations and see wonderful resorts in exotic places and it all looks very affordable. Many of the salespeople are agents and exist on the commissions they make. Their sales tactics are very aggressive and they resort to telling the consumer partial truths."
Van Schalkwyk says consumers are so busy concentrating on the film or presentation that they lose sight of the fact that they are signing a binding contract.
What worries me is when a multi-level marketing organisation overlays the points system. Most of these organisations have dubious marketing methods.
Multi-level marketing is based on one person signing up other people, who, in turn, sign up others. Each level in the organisation is paid a percentage of whatever amount is paid by people in the level below it, and the sponsors also take a slice.
For a multi-level marketing company to be legal, it must offer a product.
These pyramid organisations make many exaggerated claims, including that the system creates more wealthy people than anything else. This is plain rot. They also use hard-sell tactics. Someone who has already signed up invites you to a meeting. The meetings have the atmosphere of a religious revivalist session in which speaker after speaker hammers home the message that joining the organisation is the only way to get rich.
The problem is that if these structures were perfect, everyone would eventually sign up and everyone would be back at square one, less the amount paid to the sponsors. In reality, the pyramids are fragile and people drop out.
A legitimate reason for joining would be if you need the product being sold, and you should join only once you have assessed that the product is appropriate and offers the best value for money.
Most multi-level marketing organisations don't want you to consider their proposals rationally, so they seldom allow you to take away the documentation and study it. This is also a fault of the timeshare points industry.
You should never sign up for anything - be it timeshare, life assurance, an investment or some multi-level marketing scheme - before you have studied all the documents for two weeks, and then only after all your questions have been answered in writing and you have been able to make comparisons with other products. Signing up under pressure only makes you a potential sucker.
Before you sign on the dotted line
Manie van Schalkwyk, the Credit Information Ombud, has the following advice about buying timeshare:
- Don't let salespeople rush you or make you feel stupid or ignorant if you ask questions. Don't assume anything; ask and make sure. It is your right as a consumer to question anything.
- Make sure that you can afford the purchase and that there are no hidden costs.
- Take careful note of the time limits that apply to cooling-off periods. If the contract states you can cancel in writing in five days, but you cancel after six days, you will end up paying for something you do not want.
- Always cancel contracts in writing and get a written acknowledgement that your letter has been received, or ask the company for a letter stating that it has cancelled the contract. Telephoning the salesperson is not good enough. Do not be naive and rely on the goodwill of salespeople, who are out to earn their commission. There are some good salespeople who explain things properly, but there are also those who just want their profit and who will make misleading promises to get you to sign.
- Some salespeople ask you to fill in a contact "to qualify for a special rate", but say you can withhold your credit card details until you make a final decision about whether you want to purchase the timeshare. The salesperson tells you that if you want to cancel the contract, you just need to telephone the company and ask the salesperson to destroy the contract. But this does not happen and the contract is processed.
If a you sign a contract and it is processed, the contract is enforceable and you are liable for the outstanding money, even if you have received a verbal promise from a salesperson that he or she will destroy the contract.
- Check your contract. If a salesperson tells you something that is not in the contract, it is the contract that is going to be believed when you are listed at a credit bureau and not a partially remembered conversation with a salesperson who may have left the company concerned.
- If you have a complaint against a timeshare or holiday club sales company, you can telephone the Timeshare Institute of South Africa on (011) 805 3027. To contact the Credit Information Ombud, telephone 0861 662 837; or write to Postnet Suite 444, Private Bag 1, Jukskei Park, 2153; or email [email protected]. The ombud's website is at www.creditombud.org.za