Already facing an ASIC review that could result in a regulatory separation from financial advisers, the timeshare industry is at loggerheads with former employees who assist people to negotiate an exit from timeshare contracts.
The Australian financial Complaints Authority harbours its own concerns about the sector, but also questions whether this kind of consumer advocacy is in people’s best interests.
Mark Allison, who founded Exit Timeshares Now, says he “loves” timeshare arrangements. “Sold correctly to the right people and given full disclosure… it’s a brilliant product,” he says.
After selling timeshares for 35 years, Allison switched sides in 2018 and started charging “between $1500 and $5000” to help consumers extricate themselves from timeshare contracts, some of which span up to 99 years.
Allison says there is widespread lack of compliance in the timeshare industry.
“Wherever I’ve worked the SOA is… completely generic,” he reveals, adding that the client is rarely given time to read it.
“They’re given [the statement of advice] at the beginning of the presentation, but they put it on the floor with the PDS and don’t read it,” he says. “Then after the presentation they’ve either bought or not bought.”
The fact that timeshare operators are in the same regulatory bracket as financial advisers, he says, “doesn’t make sense”. Consumers are “confused”, Allison reckons, and often conflate real financial advice with time share operators, who can use this to their advantage.
“[Timeshare operators] have to promote themselves as licensed advisers,” he says. “They say ‘This is my AFSL number, I’m governed under legislation, here’s your SOA…’.”
The SOAs in question can be remarkably sparse; an example seen by Professional Planner was a 2-page photocopy that bared little resemblance to the kind provided by genuine financial advisers.
The timeshare sector’s biggest fear, he says, is that ASIC will change the rules so clients have to subsequently opt-in, instead of having to actively calling to opt out after signing a contract.
“That would decimate the industry, without a doubt,” he says. “It’s an emotional sale. Nobody wakes up in the morning and says they want to buy a timeshare. There’s no resale market.”
The ‘Shonky’ award goes to…
Consumer group CHOICE takes a dim view of the timeshare sector, with CEO Alan Kirkland saying they “couldn’t recommend a single product”.
“Timeshares prey on people through high-pressure sales tactics,” Kirkland said in response to ASIC’s December review into the sector, adding that CHOICE had made a number of complaints to ASIC over the years.
“This ASIC report shows how the timeshare industry is failing to comply with financial advice and responsible lending laws,” he said.
In 2018 CHOICE awarded Marriott, a major timeshare operator, its ‘Shonky’ award after it found booking through Marriott’s timeshares was 938 per cent more expensive than booking through an online booking site.
AFCA, looking both ways
While the Australian Financial Complaints Authority has expressed concern over the timeshare sector, they are just as wary of representatives charging thousands of dollars for advocacy.
“We’re also looking at Mark Allison’s role as a representative and whether his work is in the best interests of the clients,” reports Jacqueline Pirone, an Ombudsman at AFCA.
AFCA representatives have been dealing with timeshare disputes for a number of years, Pirone tells Professional Planner, but try to look at each case with a “fresh pair of eyes”.
“The issue, really, for us is timeshare owners wanting to exit a contract where they may have entered 20 or 30 years ago,” she explains. “In a lot of cases they derived a benefit from that agreement but because of individual circumstances [would] like to exit. We’re seeing that issue come up, as well as misleading and deceptive conduct and high pressure selling.”
She says they take each complaint on its own merits, and go through the usual process of internal and external dispute resolution to solve the complaint. In trying to ascertain whether the clients’ best interests have been served, Pirone continues, AFCA look at more than just the licensed entity.
“We look at best interest duty for all parties from the financial firm to the consumer, including whether a paid advocate is engaging in conduct that is in the complainants’ best interests,” she says.
“AFCA is designed to be navigated without paid representation,” Pirone continues. “That’s important. That’s AFCA. If a consumer comes to AFCA with a paid representative we are going to review what that representative is adding.”