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Protecting the Consumers of Timeshare Products

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Protecting the Consumers of Timeshare Products HOUSE OF LORDS European Union Committee 3rd Report of Session 2007–08 Protecting the consumers of timeshare products Report with Evidence Ordered to be printed 11 December 2007 and published 18 December 2007 Published by the Authority of the House of Lords London : The Stationery Office Limited £price HL Paper 18 The European Union Committee The European Union Committee is appointed by the House of Lords “to consider European Union documents and other matters relating to the European Union”. The Committee has seven Sub-Committees which are: Economic and Financial Affairs, and International Trade (Sub-Committee A) Internal Market (Sub-Committee B) Foreign Affairs, Defence and Development Policy (Sub-Committee C) Environment and Agriculture (Sub-Committee D) Law and Institutions (Sub-Committee E) Home Affairs (Sub-Committee F) Social Policy and Consumer Affairs (Sub-Committee G) Our Membership The Members of the European Union Committee are: Lord Blackwell Lord Mance Baroness Cohen of Pimlico Lord Plumb Lord Dykes Lord Powell of Bayswater Lord Freeman Lord Roper Lord Grenfell (Chairman) Lord Sewel Lord Harrison Baroness Symons of Vernham Dean Baroness Howarth of Breckland Lord Tomlinson Lord Jopling Lord Wade of Chorlton Lord Kerr of Kinlochard Lord Wright of Richmond Lord Maclennan of Rogart The Members of the Sub-Committee which carried out this inquiry (Social Policy and Consumer Affairs, Sub-Committee G) are:- Earl of Dundee Lord Moser Lord Eames Baroness Neuberger Baroness Gale Baroness Perry of Southwark Baroness Greengross Baroness Thomas of Walliswood Baroness Howarth of Breckland (Chairman) Lord Trefgarne Lord Kirkwood of Kirkhope Baroness Uddin Lord Lea of Crondall Lord Wade of Chorlton Baroness Morgan of Huyton Baroness Young of Hornsey Information about the Committee The reports and evidence of the Committee are published by and available from The Stationery Office. For information freely available on the web, our homepage is: http://www.parliament.uk/parliamentary_committees/lords_eu_select_committee.cfm There you will find many of our publications, along with press notices, details of membership and forthcoming meetings, and other information about the ongoing work of the Committee and its Sub-Committees, each of which has its own homepage. General Information General information about the House of Lords and its Committees, including guidance to witnesses, details of current inquiries and forthcoming meetings is on the internet at http://www.parliament.uk/about_lords/about_lords.cfm Contacts for the European Union Committee Contact details for individual Sub-Committees are given on the website. General correspondence should be addressed to the Clerk of the European Union Committee, Committee Office, House of Lords, London, SW1A OPW The telephone number for general enquiries is 020 7219 5791. The Committee’s email address is [email protected] CONTENTS Paragraph Page FOREWORD—what this Report is about 6 Chapter 1: Setting the Scene 1 7 Why we did the Inquiry 1 7 How we conducted the Inquiry 8 8 Chapter 2: Historical Progress: the Timeshare Market, the UK and the EU 12 9 The timeshare industry in Europe 12 9 Box 1: What is “timeshare”? 9 Complaints and consumer satisfaction 15 9 Flaws in the 1994 Timeshare Directive 20 10 Chapter 3: Holiday Clubs and their Growth 24 11 Holiday Clubs 24 11 Box 2: What is a “Holiday Club”? 11 The Holiday Club “Web” 30 12 Chapter 4: Regulatory Issues 31 13 The Timeshare Directive and the Unfair Commercial Practices Directive 32 13 The review of the consumer acquis 37 13 Common Frame of Reference 41 14 The right type of legislation? 45 15 Conclusions and Recommendations 48 16 Chapter 5: Justification for Regulation 53 17 Timeshare and self-regulation 53 17 Scope for strengthening timeshare self-regulation 58 17 Holiday clubs and self-regulation 60 18 The EU dimension 62 18 Conclusions and Recommendations 64 18 Chapter 6: The right of withdrawal and the cooling-off period 69 20 Right of withdrawal 70 20 Charges where the consumer cancels 72 20 Harmonisation of withdrawal rights 73 20 Cooling-off period 74 21 Definition of a “day” in relation to the length of the cooling off period 80 21 Informing consumers of the cooling-off period 81 22 Conclusions and Recommendations 84 22 Chapter 7: Advance Payments during the Withdrawal Period 92 24 Conclusion and Recommendation 98 24 Chapter 8: Resale and Exchange 99 25 Introduction 99 25 Definition of resale 100 25 Cooling-off period for resale contracts 103 25 Proposed ban on advance fees for resale 104 25 Exchange schemes 108 26 Exchange schemes: cooling-off period and ban on advance payments 110 26 Fees paid by consumers for exchange services 116 27 Conclusions and Recommendation 117 27 Chapter 9: Provision of Information to the Consumer 122 29 What the Commission proposes 122 29 Language requirement (Article 3.4) 129 30 Long-term costs of ownership 130 30 Flexible timeshare points clubs 132 30 Conclusions and Recommendations 135 31 Chapter 10: Raising Public Awareness 139 32 Conclusions and Recommendations 143 32 Chapter 11: Enforcement and Sanctions 145 33 Experience to date and international co-operation arrangements 145 33 Injunctions Directive 151 33 Sanctions 153 34 A licensing scheme 155 34 Conclusions and Recommendations 157 35 Chapter 12: Redress 162 36 Judicial and administrative redress 162 36 Out-of-court redress 164 36 Conclusions and Recommendations 167 36 Chapter 13: Other Issues 170 37 Extension of scope to non-fixed properties 170 37 Extension of scope to shorter timeshares 171 37 Definitions 176 37 Multi-annual hotel reservations 178 38 Timeshare owners’ rights 179 38 Termination and transfer of ownership 181 38 Review clause 183 38 Conclusions and Recommendations 184 39 Chapter 14: Summary of Conclusions and Recommendations 192 40 Regulatory Issues 192 40 Justification for Regulation 197 40 The Right of Withdrawal and the Cooling-Off Period 202 41 Advance payments during the withdrawal period 210 41 Resale and exchange 211 42 Provision of information to the consumer 216 42 Raising public awareness 220 43 Enforcement and Sanctions 222 43 Redress 227 43 Other Issues 230 44 Appendix 1: Sub-Committee G (Social Policy and Consumer Affairs) 45 Appendix 2: Call for Evidence 47 Appendix 3: List of Witnesses 49 Appendix 4: Glossary of Terms and Abbreviations 50 Appendix 5: Recent Reports 51 Oral Evidence The Timeshare Consumers Association Written Evidence 1 Oral Evidence, 12 July 2007 3 Supplementary Written Evidence 12 Organisation for Timeshare in Europe Written Evidence 13 Oral Evidence, 19 July 2007 16 Supplementary Written Evidence 24 Office of Fair Trading Written Evidence 30 Oral Evidence, 26 July 2007 32 Supplementary Written Evidence 43 Mr Gareth Thomas, Parliamentary Under-Secretary of State for Trade and Consumer Affairs, and the Consumer and Competition Policy Directorate Oral Evidence, 18 October 2007 44 Supplementary Written Evidence (Department for Business, Enterprise & Regulatory Reform) 51 Professor Geraint Howells, University of Lancaster, and Dr Christian Twigg-Flesner, University of Hull Written Evidence 54 Oral Evidence, 25 October 2007 59 Supplementary Written Evidence 69 Written Evidence Citizens Advice 72 Citizens Advice (Supplementary) 76 Group RCI 78 Andy Harris 81 Interval International 83 Local Authorities Coordinators of Regulatory Services and Trading Standards Institute 87 MEPs 92 Angus Murray 94 Tony Sedgwick 96 Shakespeare Classic Line Ltd 100 The Association of Timeshare Owners Committees 101 Timeshare Computer Link Ltd 106 NOTE: References in the text of the Report are as follows: (Q) refers to a question in the oral evidence (p) refers to a page of written evidence FOREWORD—what this Report is about Timeshare is especially popular amongst British consumers, and is a sector of the holiday market that has often come in for heavy criticism. Through its 1994 Directive on timeshare, the European Community stamped out many of the worst excesses of the timeshare market by introducing a right of withdrawal, a cooling-off period and a ban on advance payments during the cooling-off period. The subsequent reduction in the level of complaints against timeshare illustrates clearly the success of the Directive in giving consumers some protection from aggressive and misleading sales practices, and thus making the timeshare market less attractive to rogue traders. The 1994 Directive has not, however, been a complete success. It was open to some legislative loopholes that have been exploited by less scrupulous sections of the industry. New products have been developed to evade its provisions and the resulting cost to the UK consumer alone of such bad practice has been estimated at over £1 billion. There has also been a growth in fraud linked to the bogus resale of timeshare properties. It is these issues, and others linked to scope and implementation, which the Commission is now seeking to address through its proposal for a broader directive, and in this report we consider that directive’s strengths and weaknesses. Our general view is that national legislation cannot deal adequately with the problems associated with the timeshare market and that EU-level legislation is therefore appropriate. While we make a number of recommendations relating to its detail, our conclusion is that the Commission has set out a good case for a new broader timeshare directive. Protecting the consumers of timeshare products CHAPTER 1: SETTING THE SCENE Why we did the Inquiry 1. Timeshare is a worldwide phenomenon but it is one that has proved particularly popular with UK consumers as they seek holidays in warmer climates. Some 500,000 British families own a timeshare, of which around 20% are in the UK, and British residents represent one third of all timeshare owners in Europe (QQ 44–45). Moreover, the Commission’s impact assessment1 noted that half of all timeshares in Spain are owned by UK residents. 2. There are no doubt many contented timeshare owners, both in the UK and elsewhere—although our witnesses disagreed about levels of satisfaction—but the history of the timeshare market has been far from a happy one.
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