In this investigation we take a look at:
How did this windfall come your way? In a typical scenario, you were approached by a friendly-seeming sort, waving a scratchy card, probably at one of the Gold Coast theme parks such as Dreamworld, Movie World or Wet 'n Wild.
Or you could have been accosted at a shopping centre or expo, or perhaps you found your way to a timeshare seminar through some other marketing manoeuvre.
It's important to understand that these are holiday club or vacation exchange timeshares such as The Holiday Club (now called Ultiqa) and Classic Holiday Club we're talking about, not timeshares in which you actually share ownership of a property. The operation involves trading points for hotel rooms and would generally be run out of a Queensland business address at or near Surfers Paradise.
$3 million going back to timeshare customers
On a side note, CHOICE referred the timeshare industry to ASIC in 2016 on the grounds that its sales tactics are deceptive and misleading and its overly long and seemingly inescapable contracts are unclear and unfair.
We followed up with a more specific complaint regarding the quality of financial advice that Ultiqa, one of Australia's biggest timeshare businesses, offers its customers. We also pointed to an unfair contract term in its loan contract.
In September 2018, ASIC announced it had won a case against Future Holiday Finance (FHF), which provides loans for Ultiqa memberships, on the grounds that its loan assessment practices were not compliant with the law and the contract term we referenced was in fact unfair.
The clause has now been removed and won't be enforced in existing contracts, and FHF has agreed to refund up to $3 million to affected customers.
FHF has also agreed to review all Ultiqa loans contracted between 1 July 2012 and 30 August 2018. "Refunds will be provided to customers where contracts were not suitable", ASIC said in a statement.
Now or never tactics
At the seminar you're given a chance to sign up to a timeshare scheme and enjoy regular bookings in major hotels at cut-rate prices. Just think of it – deluxe rooms lined up every year that you could never have afforded otherwise. We're talking premium properties around the world!
The catch this time is that you have to sign on the dotted line right then and there, or the offer is off the table. And signing the contract means agreeing to hand over a fairly whopping sum, somewhere between $12,000 or $25,000 or more, depending on which scheme provider you go with and how many points you buy. And that's not including the ongoing annual fees.
As the seminar winds up, the wheeling and dealing comes fast and furious. The salespeople are working on commissions – the more timeshares they sell, the more money they make.
One of the many disaffected timeshare clients who have ripped into timeshare schemes on social media describes an $18,880 deal dropping to a $9350 "special offer" in a matter of minutes. It seems the timeshare spruikers really want to lock you into the deal before you have a chance to go away and think about it.
And how long do you have to think about it? Ultiqa (formerly The Holiday Club), one of Australia's largest timeshare operators with around 12,500 members, gives you a mere seven calendar days to read and understand its 39-page, largely incomprehensible product disclosure statement (PDS).
In the past, timeshare operators have given customers a mere five days to back out; they are now technically required to allow 14 days if they're not members of the Australian Timeshare and Holiday Ownership Council and seven if they are.
But beware: if you do want to bail out before the cooling-off period ends, timeshare operators can be hard to contact.
The elusive value of timeshare points
High costs, low rewards
Timeshare schemes may be one of the most diabolically clever scams going, one that can bring about a steady drain on your finances with no escape in sight. They may work for some people, but many are sorry they signed up.
Or maybe some people just think they're getting a good deal. Ultiqa's scheme, for instance, is absurdly complicated. As with other timeshare providers, you buy into the scheme with a sizeable upfront fee and sign a contract that locks you into long-term membership, 80 years long in some cases.
Membership includes timeshare points, which you trade for hotels rooms and the like – but only if you loyally pay the annual fees and other one-off levies that may appear on your invoice. Or you can buy points separately depending on the type of membership.
With the many different types of Ultiqa points on offer, the convoluted relationship between those points and varying expiry dates, figuring out whether the scheme is delivering value for money is virtually impossible.
Contracts also commit you to paying annual fees, around $200 to $300 generally, for the life of the contract, whether or not you use the scheme. The more holiday points or credits you have at any given time, the higher the annual fees. But with some schemes the fees are really off the charts.
In one case on record, 20,000 points cost a seminar attendee $19,100 – an initial outlay that didn't include the annual fees (these added up to $2875 over a three-year period).
The idea is that you redeem the points for hotel rooms, and sometimes cruise ship bookings or airfares, or trade them for hotel rooms offered through other timeshare schemes. Will the holiday amenities you end up getting be worth the money you end up paying? Many consumers would say no.
What are the points actually worth?
In one case that ended up in the NSW Consumer, Trader and Tenancy Tribunal (now the NSW Civil and Administrative Tribunal), a woman used 14,000 credit points through the Worldmark South Pacific Club to buy what was supposed to be a room with ocean views in Fiji for a week. The room she and her family ended up in had no ocean views and was cockroach-infested.
It was only the second holiday she'd taken using points, yet she'd already paid $18,000 to the club. Worldmark calculated the cash value of the points used for the Fiji trip, which included the room and two airfares, at $2662. The woman who brought the case to the tribunal thought the package was worth around $12,000 according to the number of points she used.
This underscores the fact that timeshare scheme providers can value the points however they want and change that value at any time. When the woman joined the club she bought 6000 credit points for $12,300, or $2.05 per point. When she redeemed points for the Fiji trip they were worth $0.19 each according to Worldmark's calculations, which the tribunal accepted.
Ultiqa's website says it will show you how to use and make the most of your points – only it doesn't. Its PDS, on the other hand, lays out a stupefying explanation of the convoluted relationship between Usage Points, Accommodation Points, Permanent Points, Standard Points, Getaway Standard Points, Getaway Gold Points, Term Points, Platinum Points, Platinum Points II, Linked Points and Term Interests – all of which relate in some way or another to members booking hotel rooms or holiday apartments.
In any case, Usage Points expire after three years if you don't use them – but you keep on paying the annual fees.
Paying more for less
The promise with timeshare schemes is that they're a cheaper way to holiday, but you'd never be able to verify that with the materials provided at the seminar. Upon closer inspection, you don't have to be a maths whiz to see why it might not add up, especially when the ongoing fees are factored in.
In one case we reviewed a timeshare customer signed on to paying $175 a month over 10 years plus annual housekeeping and maintenance fees. Wouldn't just booking a hotel room outright be cheaper, since the points are predicated on short-term stays?
In another case, a customer shelled out $28,680 for 5000 points from a timeshare provider (not including annual fees) but the properties she wanted to book were never available when she wanted to travel.
Alarmingly, we saw evidence of timeshare contract terms that say other unspecified fees may be added during the life of the contract and that fees can change without notice.
Getting stuck in a contract
In 2016 the Bullivants (Ian and Marjorie) got in touch with CHOICE after unsuccessfully trying to get out of a Classic Holiday Club contract they'd signed in April 2013 at a seminar in the Sydney suburb of Parramatta.
They were led to believe at the seminar that they would be able to convert points from an Accor hotels scheme to Classic Holiday Club points, but upon reading the PDS it seemed the points weren't transferable after all.
Seven days was a very tight timeframe for the Bullivants, who run a farm in rural NSW, to properly review the paperwork and take action. Classic Holiday Club hadn't provided a fax number to send in the cancellation notice, only a PO Box. They scrambled to find the fax number and found their way to a neighbour's fax machine, getting in the cancellation notice just in time.
Shortly after, Classic Holiday Club contacted the Bullivants and stated emphatically that the Accor points could be transferred over. The couple agreed to a replacement contract based on this commitment by an eager salesperson and paid $6990 to buy into the Classic Holiday Club scheme.
When they tried to transfer points from Accor to Classic Holiday Club, Accor said it couldn't be done and the Bullivants ended up losing a year's worth of Accor points. They are now locked into a 20-year Classic Holiday Club membership with annual fees of about $200. The only reason they joined was to transfer the Accor points.
Their attempts to exit the contract have been repeatedly knocked back, and Classic Holiday Club has threatened to refer them to a debt collection agency to get its ongoing fees.
Marjorie Bullivant never gave up the fight, despite the threatening letters and continuing sales pitches. "Every time they call they keep you on the phone trying to manipulate you," she told us. "What if we offer you this, what if we offer you that? It's a con. They've now admitted that they said they would do something that couldn't be done. As far as I'm concerned they owe us all the money we've paid so far. It was all just blatant lies."
(Following CHOICE's involvement in the case, Classic Holiday Club eventually agreed on a settlement with the Bullivants.)
We were contacted by another consumer who paid $1550 for a 15-year membership in Classic Holiday Club in 2012. Annual fees started at $149 but jumped to $199.
This customer found that the promised rooms and cruise ship spots had to be arranged far in advance but paid for in full with their timeshare points up front, and the offerings fell short of what he was led to expect. Rooms or cruise ship spots were never available during school holidays, for instance.
He tried to get out of the contract but was threatened with legal action. When he attempted to sell his timeshare package at a fraction of what he'd paid for it, there were no takers. It's a problem apparently faced by many looking for a way out.
Can you on-sell the deal?
A secondary timeshare market has emerged that, in the words of one social media commenter, is full of desperate people "who want to offload their timeshares and are gutted by the annual maintenance fees".
Timeshare points generally fall to about half their original value in the aftermarket. The unsuccessful on-seller we heard from was finally allowed to quit the contract and stop the annual fees, but there was no refund of his initial fee or any other fees. And he had to sign a non-disclosure agreement.
Another consumer whose case we reviewed had the same experience. He tried to get out of the $199 annual Ultiqa fee but was initially told he was stuck with the contract until 2025. He finally got out, but didn't get a refund.
The timeshare industry speaks
Ultiqa managing director Mark Henry rejected the notion that the scheme isn't giving customers a fair return for their money when we spoke to him in 2016, saying "these properties represent excellent value as they are in most cases specifically timeshare resort properties and therefore only attract an annual maintenance or levy fee as a cost for week-long stays". He added that "the volume of complaints annually is only a very small percentage of our membership base".
But Henry also touched on some of the issues that have given rise to complaints, such as having to book up to 12 months in advance. And if you want to cancel a booking any later than 45 days before the date, there is no refund. "All accommodation is subject to availability, which is clearly stated to members and is also set out in our product disclosure statement," Henry said.
He also confirmed that signing the contract seals the deal if you don't change your mind within a week. "Once the cooling-off period has expired the client enters into a legally binding contract."
Addressing complaints about lack of accommodation availability, Classic Holidays Managing Director Mark Stephenson said in 2016 that members may mistakenly think rooms are unavailable based on website listings but should call the head office to be sure. "It must also be remembered that there may be extenuating circumstances leading to us to not being able to provide a member with accommodation, such as their providing short lead times," Stephenson said.
"Whilst we strive to attain 100% customer satisfaction and would clearly like to restrict the number of complaints to zero, what we do receive measured against the 65,000 members we have is small," he added.
The Australian Timeshare and Holiday Ownership Council (ATHOC) told us that timeshare operators are tightly regulated and are required to uphold a number of consumer protections when they promote and sell their schemes, including providing a product disclosure statement, allowing a cooling off period, and having an internal dispute resolution process. Customers can also file a complaint with the Financial Ombudsman Service or the Credit and Investments Ombudsman Service if they're not happy with the timeshare operator's response.
"If a consumer was actually misled as to the benefits or features of timeshare and made a complaint to a timeshare business, the timeshare business would, on most occasions, offer to cancel the consumer's membership and refund monies paid," ATHOC general manager Laura Younger told us. "Our industry goes to great lengths to ensure anyone who is considering buying into a timeshare scheme and anyone who does buy into a timeshare knows exactly what the costs and benefits are."
Timeshare regulations and redress
Is the timeshare industry regulated?
Timeshare schemes are regulated as managed investment schemes under the Corporations Act 2001, though timeshare operators point out that the schemes are a "lifestyle" product and not an investment that will gain in value. Nevertheless, the operators hold financial services licences and are overseen by ASIC.
In 2005, a Parliamentary Joint Committee on Corporations and Financial Services recommended that the Act be expanded to include special provisions against pressure selling at timeshare seminars and full refunds for those who fall victim to it. The Committee also recommended that the Act be broadened to prohibit timeshare deals that hinge on signing a contract immediately, that the Act mandate a minimum 10-day cooling off period that can be put on hold if the customer asks for more information, and that it include anti-hawking measures that would restrict unsolicited contact aimed at steering people toward a sales seminar.
Hawkers would also have to reveal that scratch-card holiday winners and the like were actually being directed toward a timeshare seminar, and now-or-never offers would be off the table once they got there.
The recommendations to amend the Act to address these specific timeshare concerns were not taken up, and it's worth pointing out that it was complaints from the timeshare industry about over-regulation that gave rise to the parliamentary inquiry in the first place.
Most of the 700 or so timeshare sales reps working in Australia don't have university degrees or other tertiary qualification, and they are exempt from the ban on conflicted remuneration brought in by the Future of Financial Advice (FoFA) reforms. Staff turnover is high in the industry.
FOS to the rescue?
The Financial Ombudsman Service (FOS) has ruled in favour of timeshare customers seeking to exit a scheme on at least two occasions, and for the following reasons:
- The timeshare provider did not take the customer's personal circumstances into account and gave what amounted to inappropriate financial advice by recommending that she buy 20,000 points in a timeshare scheme. In this case, the timeshare provider was directed to pay back $17,975 plus interest.
- False and misleading statements were made by the timeshare provider during the sales presentation, and critical information was left out. In this case, the timeshare provider was directed to refund half the client's money plus interest: FOS ruled the customer was half to blame for failing to read the product disclosure statement.
But in another case, FOS knocked back a complaint on the grounds that the customer should have read the PDS.
You can direct timeshare complaints to FOS as well as the Credit and Investments Ombudsman Service.