Amendments to the Timeshare Directive

Details about the Timeshare Directive which came into force in 2009

Some of the major problems facing the timeshare industry and its consumers is the constant unveiling of lies and decit, not just at at the time of purchase of the timeshare but also:

The activities of so-called ‘resale companies’ who preyed on timeshare owners persuading them they could sell their timeshare for a grossly inflated price and taking a considerable up-front fee – often £1,000, but then failing to deliver a purchaser.

Long Term Holiday Products (LTHP) and Discount Travel Membership Clubs (DTMC) carefully designed to sit outside of the definition of timeshare contained in the existing 1994 European Directive (Directive 94/47/EC), and therefore denying consumers the protection afforded to timeshare owners.

Loopholes and omissions in the 1994 Directive that were becoming apparent and being exploited by companies circumventing the detail and spirit of the Directive.

The irregularities in how members States had transposed the 1994 Timeshare Directive which created confusing anomalies and needed to be addressed.

What’s the directive all about? A brief summary

The Directive is fundamentally marketing legislation, addressing only the selling of timeshare, other long-term holiday products, and resale and timeshare exchange. The following are the main areas of attention:

Pre-contractual information (sometimes referred to as disclosure information). Traders must provide comprehensive pre-contractual information to enable consumers to make an informed choice prior to being bound by any contract. The requirements for each activity are detailed separately in annexes to the Directive. All advertising and pre-contractual information forms part of the contract. All advertising must specify the possibility of obtaining the pre-contractual information and where it can be obtained, and this information must also be available to the consumer at any time during a promotion or sales event. Pre-contractual information must include details of the cooling-off period, the ban on taking any advance payments during this period, the consumers right of withdrawal, and the necessary forms for them to do so.

Cooling-off period and right of withdrawal: The Directive applies a universal 14 day cooling-off period with a right of withdrawal during this period without cost to the consumer. It applies a ban on the taking of any money during this period, including a ban on taking deposits through third parties. It places rigorous requirements on traders to provide disclosure information (see above) and considerably extends the cooling-off period in the event of any failures.

Timeshare: The new Directive clarifies, improves on, extends and harmonises the protection given to consumers buying timeshare throughout the EU. The Directive extends the scope of timeshare to include canal boats, caravans, cruise ships, etc. excluded by definition in the old Directive.

Duration of products receiving protection: Legislation defines timeshare as a holiday product formed by a “contract or group of contracts concluded for at least three years”. A number of companies devised products and trial packages specifically so that they fell outside of this definition and therefore outside of the protection provided by the legislation. The new Directive extends consumer protection to holiday products with “a duration of more than 1 year” and, in calculating that period, any provision for “tacit renewal or prolongation” is counted. It does not apply to schemes such as hotel loyalty programs.

Exchange companies: providing holiday exchange services to timeshare owners are now included in the legislation. They are required to provide comprehensive information on the benefits available to members and the charges associated with utilising the product. The 14-day cooling-off period during which no money can be taken, and the right of withdrawal, also apply to exchange contracts.

Re-sale Companies will be required to provide comprehensive information about the service being offered and will not be allowed to charge advance payments until the actual sale has taken place or the contract has been otherwise terminated. This should put a stop to the widespread fraudulent activity of the ‘resale’ predators, restore consumer confidence and allow legitimate resale companies to grow their business in assisting timeshare owners to sell their timeshare.

Invitation to meetings: There has been a considerable problem where timeshare owners have been invited to meetings supposedly to sell their timeshare. When they arrive they receive a sales pitch for another product and often some form of cash-back scheme. The new Directive requires that “where a timeshare, long-term holiday product, resale or exchange contract is to be offered to a consumer in person at a promotion or sales event, the trader shall clearly indicate in the invitation the commercial purpose and the nature of the event.” This should close the door on rogue practices where timeshare owners are invited to attend a meeting to sell their timeshare, but instead are subjected to misleading and aggressive marketing for other products.

Codes of Conduct: The new Directive encourages industry bodies and consumer associations etc. to establish Codes of Conduct and Alternative Dispute Resolution schemes (ADRs) providing out of court complaint and redress facilities for the settlement of disputes under the Directive. These bodies will be known as Code Owners. Timeshare companies may then sign up to a recognised Code of Conduct and ADR scheme. Marketing companies must provide purchasers with information on which recognised scheme they are part of, and how it operates. Conversely, they must inform a purchaser if they are not part of any such scheme. Codes of Conduct and ADR’s do not prejudice a consumer’s legal rights.

Holiday Clubs: The new Directive introduces a high degree of protection to purchasers of LTHPs and DTMCs requiring companies to provide purchasers with comprehensive information about price, discounts, and all other benefits of their product. Consumers will have a 14-day cooling-off period during which companies will not be allowed to take any payment.

Such companies will only be able to charge for membership of their Club on an annual basis and not take payment for the whole membership period at the time of sale. Consumers will have a further 14-day cancellation window each year when they receive the invoice for the following year’s membership. We expect that full disclosure of the benefits (or lack of them), together with the introduction of a cooling-off period, will save many consumers from a regrettable experience.

Enforcement: It is widely recognized that enforcement of legislation in protecting timeshare consumers has historically been very poor. The new Directive requires that “Member States shall ensure that adequate and effective means exist to ensure compliance by traders” and “provide for appropriate penalties in the event of the trader failing to comply. These penalties must be effective, proportionate and dissuasive”. We are hopeful that the tremendous benefits introduced by the new Directives will be accompanied by a greater diligence in enforcement.

Note: Consumer protection has already been improved by the Unfair Commercial Practices Directive (Directive2005/29/EC) adopted in May 2005 and now in place in Member States. This Directive prohibits misleading, aggressive and other unfair commercial business-to-consumer practices.

Published on: 26 Nov 2012