Introduction
There are 440,000 timeshare owners in the UK, over three quarters of whom have a timeshare abroad. Across the European Union (EU) it is estimated that 1.14 million consumers own a timeshare. The value of this market is significant. Within the UK alone the timeshare market is worth over £108 million per annum. And this does not include those consumers who are members of holiday clubs.
Consumers buy timeshares for the prospect of a cheaper holiday by purchasing in advance, coupled with the certainty of holiday accommodation for years to come. In some cases they might be expecting a return for their investment.
For an average initial outlay of £6,500, plus annual fees for ongoing costs such as maintenance, consumers might buy the right to use specific self-catering accommodation in a holiday complex for a specified time period each year, commonly one week, for a period of years.
There are many consumers who enjoy and are fully satisfied with their timeshare. When the Office of Fair Trading (OFT) sought information from timeshare owners in 1990, they noted that over half (64%) of those who wrote in were entirely content.
But hundreds of Citizens Advice Bureaux have reported cases where consumers are far from happy, having lost thousands of pounds on a holiday club scam. And new types of scam seem to emerge all the time. Problems in the timeshare market are not new. For example, when the OFT investigated the market in 1990, some 13 years ago, they identified the following problems:
- misleading mail shots offering prizes;
- aggressive and deceptive behaviour by sales canvassers;
- sales staff trained in high pressure selling techniques which seek to control buyers’ behaviour and suppress rational decision making; and
- incomplete, misleading and untrue information.
The OFT concluded then that: ‘...the cost of timeshare does not appear to compare favourably with the cost of a series of annual self-catering holidays of similar standard.’ Twelve years later in November 2002, the European Consumer Centres (ECC) reported evidence of the same problems with products resembling timeshare, brought to them by consumers they had advised on problems with cross-border purchases.
The Timeshare Act 1992 in the UK and the EU wide Timeshare Directive (94/47/EC) sought to address some of the problems through measures to combat pressure selling, lack of accurate information and difficulty in getting deposits refunded. The legislation defined timeshare and created:
- a cooling off period;
- specific information requirements, including for timeshare contracts; and
- a ban on requiring deposits at the point of sale.
Whilst this legislation has tackled some areas of consumer detriment in the timeshare market it does not deal with post sales problems. And the legislation has so far been a failure as a response to rogue trading which side-steps the law. The main problem is that timeshare is defined in very specific terms. The rogue element of the market had only to modify the product slightly to be outside the legislation. For example, timeshares lasting 36 months or more are caught by the legislation but 35 month contracts are not, a timeshare in a building is caught whilst timeshares in a boat are not. Consumers purchasing 35 month timeshares or boat timeshares have no cooling off rights or rights to mandatory information.
Since the early 1990’s timeshare-like products, often referred to as holiday clubs, have come into this market. They are designed to avoid the existing consumer protection measures and seem to be sold by rogue traders who often disappear with consumers’ money, having failed to deliver the product.
Timeshare-like products such as holiday clubs do not offer the consumer any certainty of being able to use specific accommodation, only access to an unidentified (and possibly non-existent) pool of accommodation that may or may not be available. Lump sum initial payment and periodic payments are demanded and the product is still sold as a means of accessing cheap holidays.
However, the lump sums have been found by the OFT to be between £3,000 and £12,000.6 Exactly the same consumer problems as those identified in the OFT report of 1990 on timeshares are common. Misleading and deceptive information and aggressive pressure selling techniques in timeshare-like sales cause significant consumer detriment and cost consumers thousands of pounds every year. Citizens Advice Bureaux and European Consumer Centres (ECCs) have reported many cases where consumers have found that the legislation on timeshare has failed to protect them, because what they have bought is not a timeshare.
The sale of timeshare and timeshare-like products has proved one of the largest areas of reported cross border enquiries for the European Consumer Centres (ECC), whose function is to advise and assist consumers to deal with problems arising where they buy outside their own European Union member state. In 2002 ECCs dealt with over 1,400 such cases. In the UK, trading standards departments reported over 4,400 complaints in 2002.
Timeshares and timeshare-like products, such as holiday clubs, have been associated with rogue selling practices for too long. There is a clear need for better legislation to protect consumers and honest traders. The failure to bring the timeshare legislation up to date has been excused by the need for a general fair trading duty to tackle all forms of rogue trading by businesses in their dealings with consumers, across the member states of the European Union (EU). Citizens Advice welcomes the European Commission’s proposed Directive on Unfair Commercial Practices. Nevertheless there is a continuing need for sector specific legislation in our view, and for this to be kept fit for purpose.
This report looks at timeshare and timeshare-like products and at evidence submitted to Citizens Advice by over 150 Citizens Advice Bureaux about problems in this market, over the period from January 2002 to July 2003. We look at how they are sold, why they can be a cause of consumer detriment and at how this detriment might be addressed in the future. We assess whether EU proposals for an Unfair Commercial Practices Directive are sufficient.
Social policy contact: email Susan Marks
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160kb) - CAB clients' experience of timeshare and timesharelike products