ASIC deputy chair Karen Chester

ASIC deputy chair Karen Chester has delivered a strong warning to timeshare operators, comparing the cohort to kings with swords hanging over their heads during a recent Parliamentary Joint Committee hearing in Canberra.

Chester faced a sequence of questions at the hearing from Labor MP Julian Hill about what ASIC was doing to counter “high levels of non-compliance with the best interest duty and related obligations” it uncovered as part of its December 2019 Report (R642) into consumers’ timeshare experiences.

“We have a Damocles sword over the industry now,” Chester said, referencing the Roman fable about the sycophant who swapped roles with Sicily’s King Dionysius for a day, only to realise a sword hung over the throne by a horse hair.

The allusion is typically meant to convey the threat that hangs over people in power.

Chester underscored that threat by explaining the regulator is currently investigating a “major timeshare operator” and expects to follow proceedings into court over the next few months.

“We have an investigation under way and we made it very clear that if they don’t clean up their act, we will go back and look at the regulatory policy settings, and decide whether or not we go to a deferred sales model with a cooling off period,” Chester said.

After being asked whether consumers should be concerned about timeshare operator behaviour, Chester replied: “I think that’s the only conclusion that can be drawn.”

‘Despair and numbness’

The timeshare industry is a pain-point for the corporate regulator, which said it had “long been concerned” with the industry in its December 2019 report, Timeshare; Consumers’ experience.

“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.

Time-share schemes involve fractional ownership of holiday accommodation and are considered managed investment schemes (MISs). 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.

While some 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 Australian Financial Complaints Authority reports 13 per cent of all MIS complaints received in the 12 months to 1 November 2019 involved timeshare.

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 through an online booking site.