If you have been invited to a timeshare presentation, be on your guard. The credit ombud has received many complaints from people who were rushed into signing contracts they did not fully understand.
You’ll probably be on the lookout for shark warnings when you relax on the beach this December, but you also need to be wary of another type of shark: circling timeshare salespeople who try to sell you contracts with fine-print clauses that may come back to bite you.
Paying in advance for the promise of a regular holiday at a luxury resort may sound tempting, but aggressive sales tactics by the timeshare industry could leave you locked into a contract that you can ill afford and are unable to get out of, Manie van Schalkwyk, the credit ombud says.
“All too often I receive complaints from consumers who have been rushed into making decisions on the spot and often I am told they have been made to sign blank contracts. However, when the timeshare company forwards the contracts to me, all the details have been filled in, so there is no way to prove that the signed contracts were blank,” he says.
Van Schalkwyk says another common scenario is consumers complaining that they cancelled their contract but it was processed regardless. “This happens most often because consumers assume that informing the salesperson verbally that they want to cancel their contract is sufficient. Unfortunately, most of the consumers who come to us for help with timeshare or vacation issues are, in fact, victims of their own inability to read the contracts that they happily signed when offered ‘free’ holidays or other benefits.”
“People go along to presentations and see wonderful resorts in exotic places, and it all looks very affordable. They fail to read the fine print, because they get so caught up in an emotional purchase,” he says. Van Schalkwyk says people are often not aware they are signing a binding contract.
“When they finally get listed at a credit bureau for non-payment, it is too late. The contract is legal; they signed it; and my office cannot help them,” he says. Van Schalkwyk says he has entered into discussions regarding aggressive sales tactics in the timeshare industry with the Vacation Ownership Association of Southern Africa (VOASA), formerly the Timeshare Institute of Southern Africa.
VOASA is a self-regulatory body that acts as the watchdog of the shared vacation ownership industry, which includes timeshare, fractional ownership, points clubs, private residency and destination clubs.
Van Schalkwyk says VOASA’s management has assured him that efforts to educate the association’s members against aggressive sales tactics will be intensified.
What to watch out for
Manie van Schalkwyk, the credit ombud, provides the following tips to keep you on the alert when you consider making a timeshare or holiday club purchase:
- Do not let the salesperson rush you, or make you feel stupid or ignorant if you ask questions. It is your right as a consumer to question anything.
- Make sure you can afford the purchase and that there are no hidden costs.
- Do not assume anything – ask about and make sure you fully understand the terms of the contract.
- Never sign a blank or partially blank document: your signature binds you to whatever appears on the document.
- Always ask yourself: “If I change my mind later, how do I cancel this contract?”
- Be aware of the time limits. If the contract states that you can cancel it in writing within five working days of signing it, you must do it within that period.
- Always cancel contracts in writing. Make a copy of your letter before sending it, and ensure you receive written acknowledgement or a cancellation letter from the company.
- If a salesperson tells you something and it is not in the contract, it is the contract that will be believed should you encounter problems later, and not a partially remembered conversation with a salesperson who may no longer work for the company.
- A salesperson may require you to fill in the contract “to qualify for a special rate” and assure you that you can withhold your credit card details until you make a final decision to buy. You may also be told that if you want to cancel the contract, all you have to do is make a phone call and the salesperson will tear it up. But Van Schalkwyk says: “We find that this does not happen and that the contracts are processed. If you have signed a contract and it is processed, the contract is enforceable and you are liable for the outstanding money, regardless of any verbal promises that may have been made to you.”
Be aware of the different types of timeshare and the associated costs
“Shared vacation products” are available to you in several different formats, Melanie Hatjigiannakis, the public relations officer for VOASA says. The different formats are:
- Traditional fixed week or conventional timeshare week. This type of ownership grants you the use of a designated unit at a specific resort for a specific week of the year (low, mid or high season) each year in perpetuity, unless the product has a time limit attached, such as 15 or 20 years.
- Flexi-week. Unlike fixed week ownership, your usage is subject to you reserving your week, either in a specified season or at any time of the year.
- Points system. Points are used as a “currency” to calculate the value of your timeshare ownership, based on the season, the size of the unit and where the resort is located. For example, it may cost you 3 000 points for a mid-season week in a four-sleeper unit at a resort on the Eastern Cape coast, but it may cost you 4 000 points for the same unit in high season.
COSTS AND RISKS
The danger with any points scheme is that the company will not hold sufficient capital to pay for your future holidays or will not own sufficient units in timeshare developments. Some points schemes, such as the Holland Moorehouse timeshare scheme that collapsed some years ago, left members with nothing to show for their money.
If you have signed up for an “exchange membership”, there is a monthly membership fee that allows you to bank your points and exchange them for use at other resorts, including international ones, for which there is also a booking fee.
The cost of points may vary between schemes, so you should compare different schemes before you commit to one. Also, with the points system you may pay more for maintenance costs than someone on a conventional timeshare scheme. In all schemes, you are also liable for an annual levy.
Some timeshare companies are registered credit providers that will grant you a loan if you qualify for one. The loan agreement will include an initiation fee, monthly administration fees and interest charges. The loan agreement will fall under the National Credit Act, and any complaints related to the loan can be submitted to the National Credit Regulator (NCR). Contact the NCR on 011 554 2600 or 0860 627 627, fax 011 805 4835 or email email@example.com
Complaints to VOASA
If you have a dispute with a timeshare, fractional ownership or holiday club company, you can complain to VOASA, which deals with complaints related to any timeshare company, regardless of whether the company is a member of VOASA or not.
Once your complaint has been received, a mediator will be assigned to the complaint. All supporting documents submitted by you will be scrutinized and, if required, you or the company concerned will be asked to submit further information. The turnaround time for timeshare complaints is usually three to eight weeks, depending on the complexity of the complaint and the response times of the parties involved in the dispute, Melanie Hatjigiannakis, the public relations officer for VOASA, says.
VOASA receives about 500 to 600 complaints a year, she says. “If a company is found guilty of breaching our code of conduct, the council can impose the following disciplinary measures: it can levy a fine of between R250 and R20 000, it can order the company to cancel the consumer’s agreement and/or order the company to pay the consumer a compensatory amount or award benefits,” she says.
Written complaints can be faxed to 021 914 5202, emailed to firstname.lastname@example.org or posted to PO Box 2823, Durbanville, 7551.
First published in Personal Finance newspaper – 18 December 2010