Timeshare resales: History will keep repeating itself until we finally get it right

The following article appears in the November edition of The Resort Trades. Addressing a matter that is significant to the timeshare industry today, it is representative of the timely and industry-relevant content The Resort Trades is known for publishing. This article is available on their website at: http://www.resorttrades.com/articles.php?showMag=Resort&act=view&id=846

It is reprinted here with their permission.

In 1983, the timeshare industry in Florida was undergoing a major transition. The opportunities and pleasures of timeshare were being greatly overshadowed by consumer confusion and dissatisfaction, primarily with the marketing and sales experience. Many people did not understand what they were being sold or where the responsibilities and rights of the developer ended and the consumer’s rights and responsibilities began.

And Florida was far from alone. Across the United States, concerns regarding developers, marketing and sales practices, and ownership confusion were at the top of the list of consumer timeshare complaints received by attorneys general in nearly every state.

If you have recently listened to Pam Bondi, the Florida attorney general, you might think it is 1983 all over again. Only this time, the ever-mounting stack of complaints piling up in the offices of Bondi and her counterparts across the country is specifically directed against fraudulent practices in timeshare resales and timeshare transfers.

The nature of the complaints is much the same, with consumers objecting that their credit cards are being charged without their permission; that they feel they don’t understand the service they are buying; that they are being lied to; or that the sale (or in this case, the resale) has been shoved down their throats.

Same song, different verse

In 2011, everything old is new again, as timeshare resale and timeshare transfer problems rank number one nationally in consumer complaints. But the state of Florida is about to take dramatic action to put a stop to this once and for all. On October 4, Attorney General Bondi, Senate Majority Leader Andy Gardiner and Representative Eric Eisnaugle, with the support of both the AARP and ARDA, announced a legislative initiative to clean up timeshare resale and transfer practices and to better protect Florida timeshare consumers.

The proposed legislation is designed to strengthen existing laws by addressing unfair and deceptive marketing and business practices by timeshare resale and timeshare transfer companies. Howard Nusbaum, president and CEO of ARDA says, “ARDA applauds General Bondi’s leadership in spearheading this groundbreaking legislative effort. We are committed to working with her office to provide a safe and healthy resale business climate in Florida.” Attorney Rob Webb, the senior hospitality partner at Baker Hostetler has reviewed a draft of General Bondi’s resale/transfer legislation. Webb explains that ARDA-Florida has encouraged Bondi to include many elements of the ARDA Model Timeshare Resale Act in her legislation, and that some of the provisions of the draft he reviewed include:

• A timeshare resale advertising company will not be permitted to in any way misrepresent that it has a buyer on hand for a timeshare resale unless it can document that such is really the case.
• Timeshare resale advertising contracts will be required to be in writing with a clear and detailed disclosure of the nature and frequency of services to be provided as well and their cost, and no money will be able to be taken from the consumer until both the consumer and the advertiser have signed the contract.
• Both timeshare resale advertising and transfer agreements will be required to include a cancellation period, probably seven days after the consumer signs the agreement.
• Timeshare transfer companies will be required to escrow all monies paid by the consumer until the timeshare transfer is fully completed.

New song, new day

Here’s what we learned from the legislative crackdown on timeshare developers in the early 1980s: If you make the consequences and penalties tough enough, even reluctant businesses will comply. The 1983 Florida timeshare law made it a third-degree felony for a timeshare developer or seller to intentionally fail to escrow consumer purchase monies until the product is delivered as promised, and Rob Webb believes that the new proposal will impose a similar requirement on transfer companies. He also says that misfeasors may receive civil penalties as high as $15,000 for each violation of the law.

Timeshare has always been a magnet for deceptive business practices, although the reasons probably no longer matter. Perhaps if, in the early days, more thought had been given to the importance of a viable timeshare resales market and resales regulations had been put in place from the get go, then there would have been no need for the current crackdown.

But by whatever means is necessary in order to get it done, standardizing and regulating every aspect of the timeshare industry is critically important to the industry’s reputation and to customer satisfaction with timeshare products. Today, complaints regarding timeshare developer sales are practically non-existent; in the near future, the industry will hopefully be able to say the same thing regarding timeshare resales and timeshare transfers.

Yes, timeshare resale, advertising and transfer companies will be required to make adjustments, and in many cases radical changes, if this legislation becomes law. These changes will come at a significant price in both man-hours and compliance costs. But it is a small price to pay in order to build a timeshare resale industry that earns and inspires both consumer trust and developer confidence. This proposed legislation is healthy for timeshares, healthy for timeshare resales and is an initiative everyone in the industry should rally behind.