Travel Bans During COVID Crisis Fuel Call For Timeshare Reform

In the wake of COVID-19, a flood of timeshare owners have tried to cancel their contracts, citing travel bans and health fears that make them untenable. 

Disastrous as it is, the pandemic alone is not a valid reason to exit a timeshare, according to timeshare exit companies. However, there are plenty of valid reasons to cancel a contract for a timeshare, including exorbitant maintenance fees, false advertising, and fraud, according to Brandon Reed, the CEO and founder of Timeshare Exit Team and a founding member of the Coalition to Reform Timeshare.

Reed points out that timeshares – a shared ownership in a resort or vacation property – were different in the early years. “When timeshares first appeared in the 1970s, they were less expensive then and allowed people to visit the property on certain dates each year, so owners could plan around it,” he says. But fast forward to 2020:  Millennials, he says, are not interested in timeshares, and companies are trying to make up for it by squeezing an inordinate amount of money from people who buy or already own them. 

“The sellers are promising this beautiful property which you can visit any time you want, and often that’s not true at all,” says Reed, a former timeshare owner. “And they’re expensive now, with the average price at nearly $21,455. If you take out a timeshare mortgage at a high interest rate, you could end up paying nearly double that over a 10-year period. And on top of that, you have yearly maintenance fees. But what’s worse — and what people rarely understand — is that nearly two-thirds of these are sold in perpetuity, meaning that you can’t get rid of them! You can try to sell them, sure — eBay has dozens of timeshares selling for a dollar, and even then no one will buy them.” 

Many buyers have learned about this the hard way, including Frank and Betty Lusk, who were almost in their nineties when they went on a Caribbean cruise in September 2018 and were approached by a Diamond Resorts salesman on the voyage. Using high-pressure tactics, he persuaded them to buy a $150,000 timeshare that billed them for thousands of dollars each month – landing Betty Lusk in the hospital several times with stress-related illnesses – before they were able to cancel it with the help of Reed and his Seattle-based timeshare exit team.

For its part, Diamond Resorts told reporters in a written statement that it believed in “accountability and transparency” throughout the sales process — a commendable goal, since in 2017 it had had to pay $800,000, cancel dozens of timeshare contracts and pledge to reform sales practices to settle a fraudulent practices case brought by the Attorney General of Arizona.

In the wake of the COVID-19, Reed’s Timeshare Exit Team has proposed joining forces with the American Resort Development Association (ARDA) – which represents the timeshare industry — to relieve the burden on struggling timeshare owners during the coronavirus crisis. On April 14, the exit team sent a letter to ARDA proposing that the association:

— Give timeshare owners a one-year hiatus on all maintenance fees (“if they can’t safely use the property, please do not charge them for it”).

—Help both ARDA’s customers and the exit company’s customers by providing Responsible Exits for all timeshare owners facing a hardship, whether medical, financial or for another reason.

—Establish a mortgage forgiveness program.

—Make it possible for all paid-in-full timeshares to be transferred back to the resort at no cost.

“In return, and in good faith, we will work with you; no attorneys, no third parties,” the exit team proposed, adding that they would help with the paperwork and walk customers through the exit to ensure a good experience.

On April 17, the Timeshare Exit Team sent another letter urging cooperation to the chair of ARDA-Resort Owners Coalition, noting timeshare owners’ panic and anger over the industry’s “hardline tactics” during the crisis.

To date, the company reports that ARDA and ARDA-ROC have not responded.

A barrage of lawsuits

The powerful resort industry has long warned consumers about timeshare exit and resell operations, some of which are fraudulent. However, Timeshare Exit Team’s successes helping consumers who want to end their timeshares also appear to have attracted its ire.

Diamond Resorts, for example, is currently suing Timeshare Exit Team in Nevada for “tortious interference” in its business, among other things. Reed’s timeshare exit company has also been sued by Holiday Inn Club Vacations, whose recent legal victory in Florida bars the company from soliciting its clients.

However, in a significant defeat for the timeshare industry, a Florida district judge dismissed a suit by the Westgate resort company against Timeshare Exit Team, which it had accused of false advertising and unfair business practices. “Major timeshare developers like Westgate are trying to fool the public by lobbing these frivolous complaints,” said Reed.

More worrisome is a lawsuit by the Attorney General of Washington state, which charged that Reed Hein and Associates LLC, doing business as Timeshare Exit Team, had engaged in unfair or deceptive business practices. Among other things, the consumer protection lawsuit says that Reed Hein advertised a 100 percent money-back guarantee to some 32,000 clients, but that many did not get refunds even if the timeshare was foreclosed on or if the dispute went on for several years.

In a written statement to reporters, Reed wrote that since 2011, the Timeshare Exit Team had successfully helped more than 20,000 consumers exit their timeshares and is working on the others:

“The vast majority of Timeshare Exit Team’s customers choose to continue with the exit process and are adamant that they do not want a refund because it’s a much better option to wait a little longer to obtain an exit and get out from under overbearing pressures of the lifetime financial burden that is put on them by their timeshares,” Reed wrote.

Responding to the allegations about foreclosure, Reed said that his timeshare exit company was “extremely clear” to consumers that they should remain financially responsible for their timeshare until the exit is complete.

“We do not settle out consumer debt,” Reed stated. “Third-party attorneys hired by Timeshare Exit Team for our customers may negotiate directly with the resort to settle their clients’ debts, but that is a service that is lawfully provided by the attorneys, not TET… We have complied with the AG’s inquiry from day one and will continue to do so until it’s clear to all involved that these accusations are entirely baseless.”

Predatory sales, few protections

The real problem, according to Reed and the Coalition for Timeshare Reform, is that there are far too few protections for timeshare owners and potential buyers. The Federal Trade Commission offers extensive cautions for people thinking of buying a timeshare, and the Consumer Federation of America warns of “reseller” scams that may await consumers who want to unload their timeshare.

However, timeshare companies’ offers to take back unwanted timeshares are disingenuous at best, Reed charges, noting that his clients who had tried to “surrender” their paid-off timeshares were pressured to upgrade instead.

Indeed, the Coalition to Reform Timeshare has underscored this by publishing the minutes from a meeting of the American Resort Development Association’s resort owners discussing the industry’s Responsible Exit program, which it rolled out in 2018.

Rather than offering a way that consumers could exit a timeshare intact, an industry leader apparently suggested the opposite.

 “The best thing we can do with exit (is) judicial foreclosure, ruin the credit and enforce the contract,” said Ken McKelvey, chair of the American Resort Development Association-Resort Owners Coalition, according to letterhead minutes of the April 10, 2019 ARDA-ROC meeting at the industry’s ARDA World annual conference.

“Each developer should have an exit strategy office with (their) call center, also can be opportunity to upsell. Only 40-50% (of owners) actually exit after reaching the office of exit,” McKelvey added, according to the minutes.

Contacted about the meeting notes, ARDA did not respond by publication time.

“It’s hard to imagine another industry that is so unregulated,” says Reed, explaining that the Coalition for Timeshare Reform is pushing for a Timeshare Bill of Rights to protect more than 9 million timeshare owners in the United States.

The Timeshare Bill of Rights contends that timeshare companies “should be subject to a strict code of ethics and transparency in their sales techniques.”

Among other things, the document calls for the right for consumers to record a timeshare company’s entire sales presentation; a cooling-off period prior to signing a contract; freedom from high-pressure sales tactics (including salespeople demanding people hand over their credit cards or drivers’ licenses before a sales presentation); disclosure of a timeshare’s costs and true market value; and the right to unilaterally terminate “an unencumbered, non-deeded” timeshare interest.

Consumer anger over hard-sell tactics

The ability to record an entire sales presentation would have come in handy for a Tennessee couple who resisted a Wyndham properties hard-sell pitch to buy a timeshare and discovered that the company subsequently opened a $15,000 credit line for them — without their permission.

In a story reported by local television news, the couple – Doyle and Mindy Campbell — were lured to a Wyndham resort a couple of years ago on what they say were false pretenses: They had entered a shopping mall drawing for a Range Rover, only to receive a phone call telling them they had won a “very expensive prize” and inviting them come to an 1 ½ hour presentation and pick it up.

Upon arrival, the couple was forced to sit through 3 ½ long hours of salespeople haranguing them to buy a timeshare. Finally, they said, they were told to fill out some forms in order to get their prize, which the Campbells say Wyndham secretly used to open a credit line in their name. 

And the prize? It turned out to be four airline tickets with so many restrictions that the couple would have had to shell out thousands of dollars to use them. They promptly threw them away. 

For its part, Wyndham – currently the target of a class-action suit alleging timeshare fraud – told reporters that the couple received their prize and that if they didn’t want the credit line, all they had to do was close it. However, just opening a credit line can interfere with a consumer’s ability to buy a home or other major purchase for up to two years. “It was a scam,” Doyle Campbell told the television station. “And we probably aren’t the only ones they done like this.”

Even some timeshare owners who enjoyed their timeshares say the annual fees, relentless sales pitches, and perpetuity clauses led them to sever their contracts.

Brent Campbell, a father of six and a salesman by trade in Buckeye, Arizona, remembers resenting the hard-sell pitches by salespeople each time he and his wife visited their timeshare.

“They invite you to members’ meeting and then pressure you to buy more points,” Campbell told Forbes.com, remembering that even once when he and his wife were enjoying a quiet dinner in their vacation suite, a timeshare salesman came pounding on the door. “They try to squeeze more money out of you each time. It feels like a shakedown.”

Worried that the soaring annual maintenance fees would eventually be passed on to their children, the Campbells contacted Reed’s timeshare exit team for help.

“The timeshare industry is trying to pretend they’re selling real estate, but they’re not,” says Reed, whose company helped the Campbells get rid of their timeshare. “If it was real estate, their children could just sell it and even make a profit.” But the problem is that even if the timeshare mortgage is paid off and their children don’t use the property, they would still be responsible for escalating annual maintenance fees.

“I didn’t want to put this albatross around my kids’ neck,” says Wayne McClellan, a former Dupont senior executive in Houston, Texas, who had bought a timeshare from Grand Vista that was later sold to Westgate.

McClellan and his wife Carol, an X-ray technician, were high school sweethearts. Attracted by the theatre and comedies in the tourist town of Branson, Missouri, they were convinced to buy a timeshare there in the mid-1990s. The McClellans found the timeshare company “very accommodating” in terms of scheduling and loved staying at the resort with their friends and family. However, it grew continually harder, after an 11-hour drive, to sit through the obligatory 1 ½ to 2-hour sales presentation each time they visited. In addition, the maintenance fees had doubled over time.

McClellan could easily withstand a hard-sell timeshare pitch to buy more —“As a former purchasing manager, I had a lot of training on how to deal with boisterous salespeople,” he laughed. But although still active, he and his wife had developed some health problems and needed to cancel their timeshare contract. No one at Westgate wanted to do that, he said, but they were able to get out of his contract with the help of Timeshare Exit Team.

“It wasn’t cheap, but I realized [the exit payment] would pay for itself in a couple years,” McClellan said. “We had a lot of good times at the property, but ultimately we did not want to burden our kids with it.”

For his part, Reed says he has been encouraged by timeshare bills in various state legislatures in 2019, including recent pro-consumer legislation signed in Arizona. “The industry is in desperate need of reform,” he said. “We’ve had people in our office tell us they are contemplating suicide because they cannot get rid of a timeshare that is ruining them financially. It’s so important to get some basic protections in place.”

This post first appeared on Forbes.com. To see the original, click here.