Need to know
- Penalty sends “a significant message” to the timeshare industry, ASIC says
- The latest court ruling comes after CHOICE filed five official complaints to the regulator about the industry
- Many Ultiqa customers paid significant sums and got little or nothing in return
In the wake of a May 2022 federal court decision that found holiday timeshare scheme provider Ultiqa violated financial advice laws, the business has now been slapped with a $900,000 penalty in a case brought by the Australian Securities and Investments Commission (ASIC).
"Ultiqa prioritised sales over appropriate advice and ultimately consumers' best interests," says ASIC deputy chair Karen Chester.
"The penalty against Ultiqa, the first against a timeshare provider, sends a further significant message to the timeshare industry. When sold alongside financial advice, it is both fundamental and legally required that the advice is in the consumers' best interests."
Five official complaints to the regulator
CHOICE has lodged five official complaints with ASIC about timeshare schemes since 2016.
In 2021, we lodged a 'super complaint' to ASIC about the industry as a whole, alleging at least eight industry-wide breaches of financial services laws.
The penalty against Ultiqa, the first against a timeshare provider, sends a further significant message to the timeshare industryASIC deputy chair Karen Chester
In the May 2022 ruling, the court held that Ultiqa had failed to act "efficiently, honestly and fairly", in part by not properly supervising its sales staff, who often relied on pressure tactics to sign up customers.
The sales tactics were, in effect, a form of financial advice – advice that was often inappropriate to the customer's financial circumstance.
An Ultiqa sales manual that came to light in the May case instructed that if prospective customers indicated that they wanted to leave the sales seminar, salespeople should "do everything you can do to amuse, interest, excite, relax, humour, flatter and if necessary cajole your clients into staying".
Ultiqa salespeople were trained in hard-sell tactics that disregarded potential customers' financial circumstances.
'They got nothing for their money'
Most Ultiqa customers took out loans from a company affiliated with the timeshare provider to pay for their schemes. Upfront costs ranged from $10,000 to $25,000, with ongoing yearly fees of up to $800.
"Despite these significant costs, many could not even book holidays in their timeshares due to a lack of availability – meaning they got nothing for their money," says Chester.
Many timeshare schemes keep customers locked in contracts lasting as long as 99 years, with no means of escape.
The timeshare industry is now on notice. It must clean up its harmful sales practices or face further regulatory actionCHOICE head of policy Patrick Veyret
In May 2021, we published the results of a survey that indicated widespread dissatisfaction among timeshare members.
Seven in 10 of the 351 members we heard from said their long-term schemes would pass on to their children, who would then be stuck with the yearly fees. Almost one in three said they'd like to leave their schemes, but couldn't. A further one in 10 said they were thinking about leaving.
CHOICE welcomes decision
"We welcome the decision of the Federal Court, which highlights the predatory sales practices of the timeshare industry," says CHOICE head of policy Patrick Veyret.
"The industry is founded on pressuring people into expensive and lengthy schemes which are incredibly poor value. The timeshare industry is now on notice. It must clean up its harmful sales practices or face further regulatory action."
Stock images: Getty, unless otherwise stated.