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Australia’s timeshare industry accused of trapping people into long-term contracts

·4-min read

Consumer group Choice has accused the timeshare holiday industry of predatory sales tactics and trapping people into unfair long-term contracts in a wide-ranging complaint lodged with the corporate regulator.

“Respondents report feeling fear, shame, embarrassment, a sense of defeat and guilt with their timeshare products,” Choice said in the complaint, which was sent to the Australian Securities and Investments Commission last Thursday.

“At every stage of the timeshare journey, consumers have reported unfair or oppressive practices that Choice believes is either in breach of the law or falls well below community standards and expectations.”

It called on Asic to prosecute timeshare operators who break the law and investigate the industry over allegations of misleading and deceptive conduct by salespeople and breaches of anti-hawking laws, which are designed to stop the unsolicited sale of financial products, at timeshare seminars.

Choice also wants a parliamentary inquiry into the industry that would examine issues including “what legislative and regulatory changes are necessary to protect people from harmful timeshare schemes and improve industry practice”.

Any crackdown by Asic would put the regulator, which is already under heavy political pressure from the Morrison government over issues including responsible lending laws, on a collision course with Queensland senator and the assistant minister to the attorney general, Amanda Stoker.

Related: Worse than water: Choice’s 2020 Shonky awards shames cleaning products, air purifiers and Harvey Norman

Stoker has complained in parliamentary hearings about action Asic has already taken against the industry, including a proposal to extend the cooling-off period between agreeing to buy into a timeshare scheme and the contract becoming binding from seven days to 14.

At an estimates hearing in October, she questioned whether Asic’s move “represents a proportionate response, or whether it represents something of a vendetta against the industry”.

Choice campaign adviser Patrick Veyret said this was the fifth complaint the consumer group has made to the regulator about the timeshare industry since 2016 and it was “disappointed and frustrated by Asic’s limited enforcement action while people are struggling with timeshare products”.

“Asic has the power to act against unfair and predatory practices in the industry. They need to use it,” Veyret said.

Research by both Choice and Asic has shown that as people get older and can no longer make as much use of holiday accommodation, many become concerned that they will not be able to get out of timeshare contracts, which can run for up to 99 years.

In its complaint, Choice said 70% of respondents to a survey thought that the burden of continuing to pay timeshare fees would be passed on to their children after they died.

However, one of Australia’s leading consumer law experts, Jeannie Paterson, who is a law professor at Melbourne University, said this was untrue.

“Children don’t automatically or directly inherit the debts of their parents,” she said in an appendix to the complaint.

Title-based schemes, where members pay for access to a particular holiday property, are no longer offered in Australia but Choice said it had heard from members of existing schemes that they were unable to escape.

Newer schemes are based on members buying points and redeeming them for holidays.

However, Choice said these can also be extremely costly, with some contracts lasting more than 60 years and costing hundreds of thousands of dollars.

Classic Holidays has also attempted to charge customers “a prohibitive amount of money” to switch out of a title-based scheme and into a points-based one, Choice said.

Classic Holidays said the obligation to pay into title-based schemes continued after the member’s death.

“For holders of timeshare products which are likely to continue beyond the death of the member, how the ongoing financial obligations associated with that timeshare are a real and potentially significant concern for those holders, and an issue of which the holder is generally aware,” it said in a response to Choice, which the organisation provided to Guardian Australia.

“To the extent Choice is insinuating that Classic Clubs utilises such circumstance as a ‘scare’ tactic in communicating with legacy scheme members who contact us regarding exit options, we strongly refute such insinuation.”

It said it was not aware of any requirement that it offer relief on the grounds of hardship to members of title-based schemes.

The industry body, Australian Timeshare and Holiday Ownership Council, said its survey showed 65% of timeshare owners were satisfied or very satisfied with their purchase.

“However, members in some early legacy schemes have experienced issues in disposing of their interests as the applicable state-based title laws do not allow ageing owners in those schemes to exit or walk away from their titled ownership without the title being transferred to another party,” a spokeswoman said.

“ATHOC is aware that a number of current consumer complaints relate to the inability of some members to exit from a legacy scheme. ATHOC has been in regular discussions with regulators in recent years in order to seek relief or a solution for these members.”

Asic has been contacted for comment.

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