Amendments to the Timeshare Directive

Details about the Timeshare Directive which came into force in 2009

Some of the significant issues facing the timeshare industry and its customers is the constant unveiling of lies and deceit, not just at the time of purchase of the timeshare but also:

The operations of so-called ‘resale companies’ who targeted timeshare owners convincing them they could sell their timeshare for a greatly inflated price and taking a substantial up-front fee – often £1,000, but then failing to deliver a purchaser.

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

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

Inconsistencies in how member States had implemented the 1994 Timeshare Directive, led to confusing anomalies that required resolution.

What’s the directive all about? A concise overview

he Directive primarily focuses on marketing regulations, specifically addressing the sale of timeshares, other long-term holiday products, and resale and timeshare exchange. The key areas of concern include:

Pre-contractual information (sometimes termed as disclosure information): Traders must furnish comprehensive pre-contractual information to enable consumers to make informed decisions before being bound by any contract. The requirements for each activity are outlined separately in annexes to the Directive. All advertisements and pre-contractual information are integral to the contract. Advertisements must specify the availability of pre-contractual information and where it can be obtained. Additionally, this information must be accessible to consumers at any point during a promotional or sales event. Pre-contractual information must encompass details of the cooling-off period, the prohibition on receiving advance payments during this period, the consumer’s right of withdraw, and the requisite forms for exercising this right.

The cooling-off period and right of withdrawal: The Directive enforces a standard 14-day cooling-off period with a right of withdrawal during this period without cost to the consumer. It prohibits the collection of any funds during this period, including deposits through third parties. Traders are obligated to provide detailed disclosure information and any shortcomings extend the cooling-off period significantly.

Timeshare: The updated Directive clarifies, enhances, and standardises consumer protection for timeshare purchases across the EU. It broadens the definition of timeshare to encompass canal boats, caravans, cruise ships, etc., which were previously excluded.

Duration of protected products: Legislation defines timeshare as a holiday product formed by a “contract or group of contracts concluded for at least three years”. Several 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 lasting “more than 1 year,” including any provisions for automatic renewal. It excludes schemes like hotel loyalty programs.

Exchange companies: Companies offering holiday exchange services to timeshare owners are now covered by the legislation. They must furnish comprehensive information on member benefits and associated charges. The 14-day cooling-off period and right of withdrawal also apply to exchange contracts.

Resale companies must furnish detailed information about their services and are prohibited from charging advance payments until a sale is finalized or the contract is 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 by assisting timeshare owners to sell their timeshare.

Invitation to meetings: There has been a significant issue where timeshare owners have been invited to meetings supposedly to sell their timeshare. Upon arrival, they are subjected to a sales pitch for a different product and often some form of cash-back scheme. The new Directive mandates 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 indicate in the invitation the commercial purpose and the nature of the event.” This should close the door on deceptive 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 robust protection for purchasers of LTHPs and DTMCs, necessitating companies to furnish purchasers with comprehensive information about pricing, discounts, and all other benefits of their product. Consumers will have a 14-day cooling-off period during which companies are prohibited from accepting any payments.

Such companies will only be permitted to charge for membership of their Club on an annual basis and are prohibited from receiving payment for the entire membership period at the time of sale. Consumers will have an additional 14-day cancellation window each year upon receipt of the invoice for the following year’s membership. It is anticipated that full disclosure of benefits (or their absence), along with the introduction of a cooling-off period, will prevent many consumers from experiencing regrettable situations.

Enforcement: It is widely acknowledged that enforcement of legislation to protect timeshare consumers has historically been inadequate. The new Directive mandates 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: Note: Consumer protection has already been enhanced by the Unfair Commercial Practices Directive (Directive 2005/29/EC), adopted in May 2005 and now in effect in Member States. This Directive prohibits misleading, aggressive, and other unfair commercial practices targeting businesses to consumers.

Published on: 26 Nov 2012