Australians are allegedly being ripped off by dodgy timeshare contracts that have locked them into paying hundreds of dollars in annual fees for decades.
Consumer group Choice is urging corporate regulator ASIC to investigate new 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.
Choice has lodged an official complaint with ASIC in which it calls on the regulator to prosecute several timeshare providers it believes are breaking financial services rules.
One timeshare owner, who spoke to The New Daily on Monday but declined to be named, said they were stuck in a 35-year-old contract that charged $670 in annual fees.
The contract cost $9000 initially, but the owner is struggling to offload it as no one is prepared to pay anything for it today.
“I get less than a week’s worth of accommodation a year … I can find better deals on the internet,” the owner said.
“It’s not possible to sell them. Mine has been on the market 12 months.”
Another owner, Coral Matcham, a 66-year-old retiree, is paying $912 in annual fees under a 99-year timeshare contract she purchased in 1996.
Mrs Matcham is financially vulnerable after spending her super on debt, living expenses and medical bills for her husband Wayne, who battled cancer and died a couple of years ago.
“I’m on an old-age pension, and there’s no way on God’s green earth I can afford this on a pension,” Choice quoted Mrs Matcham as saying.
Dodgy deals hurting consumers
In a report released on Tuesday, Choice said providers were preying on vulnerable people, with a recent survey of 350 owners finding almost 30 per cent wanted to exit their contracts and one in five saying sellers misled them.
But, because most timeshare owners bought into their schemes 30 to 40 years ago – before the introduction of a more recent scheme designed to protect buyers – many providers have escaped regulatory scrutiny, Choice said.
University of Melbourne’s Melbourne Law School professor Jeannie Paterson said those who bought timeshares in the 1980s had been sold on the idea they would be good investments, a promise that never came true.
“It’s almost impossible to sell them, and because of the length of time since they were purchased, it’s really hard for consumers to gain clarity about what it is they own,” Professor Paterson told The New Daily.
“The overall scheme is unclear, the question is unclear and their options for exit are also unclear.
“In some instances, people are being told things that are just wrong about their options – it’s like a triple whammy.”
There are two main types of timeshare contracts: Title-based schemes, where a customer enters a contract providing access to a specific property, and points-based schemes, where customers buy a set number of points they can redeem each year for holiday accomodation.
In each case, consumers reported being told by timeshare providers that they would be unable to tear up their property shares or credit deals.
If they did, they could be charged all the outstanding annual fees on their contracts in a lump sum (payout).
And because contracts last between 20 and 99 years, that charge could run into tens of thousands of dollars.
Calls for ASIC action
Choice wants ASIC to set up a new remediation scheme to help people who have bought timeshares after suffering unsolicited, misleading or deceptive sales tactics, or after receiving bad financial advice.
“The timeshare industry consistently hurts consumers, trapping people into expensive contracts that have little or no value,” Choice said on Tuesday.
The corporate regulator published a report into the timeshare industry in late 2019, identifying widespread reports of poor sales practices and concluding that many buyers were effectively ripped off by sellers.
In late 2020, ASIC then created requirements for hardship arrangements and new disclosure rules for providers, although relief for those under legacy schemes was pushed for further industry consultation.
Choice banking policy expert Patrick Veyret said ASIC needed to take more concrete action, saying the regulator has not prosecuted a single timeshare provider for breaches of financial advice laws.
“We’re disappointed and frustrated by ASIC’s limited enforcement action while people are struggling with timeshare products,” Mr Veyret said.
“ASIC has the power to act against unfair and predatory practices in the industry. They need to use it.”
Choice has already written four complaints about timeshare deals to ASIC, and believes there’s a question to be answered about whether the regulator should allow the industry to operate at all under current rules.
Mr Veyret said the federal government should also direct an inquiry into the industry with a view towards regulatory change to assist consumers.
He said “the federal government needs to find ways to help people trapped in old-style timeshare schemes with few practical ways out”.