ASIC will soon tighten regulation around time-share schemes after a commissioned study found widespread misconduct in the sector leading to a flood of complaints and significant harm to consumers.

The regulator will release an updated version of its 2012 regulatory guide, Time-sharing schemes, in the next few months, which will incorporate a review of relief provided to the schemes from certain aspects of the Corporations Act.

An ASIC representative confirmed that the updated guidance is scheduled to be released towards the end of March or early April after a short consultation period.

“We have long been concerned about timeshare,” ASIC said in its December 2019 report, Timeshare; Consumers’ experience.

Time-share schemes (timeshares) are financial products involving fractional ownership of holiday accommodation and considered managed investment schemes (MISs), which puts them under ASIC’s purview. Despite representing only 0.42 per cent of all MISs, one fifth of all reported MIS complaints received by ASIC in FY19 involved time-share schemes.

“The reports of misconduct cover a broad range of issues, including pressure-selling practices, misleading and deceptive conduct, access to and use of accommodation, exit arrangements and responsible lending,” ASIC stated in the report, adding that it found “high levels of non-compliance with the best interest duty and related obligations”.

The Australian Financial Complaints Authority tells a similar story; in the 12 months to 1 November 2019, 13 per cent of all MIS complaints to AFCA involved timeshares.

The regulator indicated that the study’s findings will directly funnel into updating the “regulatory settings” for timeshares.  A formal investigation is already underway, the report adds.

While some participants experience satisfaction with timeshare membership, ASIC stated, there was overall a “high level of discontent” among participants, whose feelings included “anger, frustration, disgust, despair and numbness”.

The situation is probably even worse than the study was able to glean, ASIC reckons.

“The sense that participants themselves had contributed to this situation seemed to contribute to a lack of motivation to tenaciously pursue redress, which suggests complaint statistics may understate the extent of consumer issues with timeshare memberships.”

Not reflective of the sector

The Australian Timeshare and Holiday Ownership Council (ATHOC), which is the industry body for timeshare operators, said it welcomed ASIC’s study.

ATHOC’s president, Ramy Filo, said it was already working with the regulator on “longer cooling-off periods, easier-to-understand explanations around fees and costs and clearer product disclosure statements”.