Warning on timeshare loan deals

Trading officers are investigating holiday remortgage 'bargains' that have left couples worse off. Paul Gosling reports

SAVE money by remortgaging, and a timeshare will be thrown in free: holidaymakers going to Majorca and Tenerife during the winter have been warned against offers amounting to this.

Sixteen couples who signed such timeshare-cum-remortgage deals while on holiday in the summer have since lodged complaints saying that the cost has turned out much higher than they were led to believe.

Those who have complained say they were advised that by remortgaging their existing homes they could save large sums of money, and, in some cases, that the combined cost of the remortgage plus the timeshare would be less than the existing mortgage. But on returning home they found that the cost of the new mortgage was as much as twice as high as expected.

The Office of Fair Trading and trading standards officers are now investigating the role of the Mortgage Advice Centre in Leicester, which provided all 16 quotes for the remortgages by fax to the holiday resorts. If the complaints against the company are upheld it could lose its consumer credit licence, which would prevent it from continuing to sell mortgages.

Diana Hanks, of the Timeshare Council, which represents legitimate timeshare sellers, says that she has received a steady stream of complaints this year. She adds that the complaints are just the tip of the iceberg. People who sign up may well then find themselves contacted by debt collectors and solicitors acting for the timeshare sellers.

Complainants tell a consistent story of pressure sales tactics. While walking along a street they are given scratchcards which yield the star prizes, which, they are told, might be a free holiday, camcorder, or cash. To collect the prize punters need to go to a local hotel. After a long discussion, during which they may be given lots of champagne and the promise of a free meal and a second free holiday, would-be purchasers are told they can buy into the hotel as timeshare owners. If they say they cannot afford a timeshare, they are asked their personal details and within minutes are given a faxed quote purporting to show how cheap a timeshare would be if they remortgage their existing home at the same time.

They are then put under pressure by the timeshare sellers in the resort to sign a contract for a timeshare purchase before they leave.

In July, Philip and Jennifer Harmer from Gloucester were on holiday in Majorca, where they won a scratchcard "star prize". They went to collect it. They were told that they could buy a timeshare apartment valued at pounds 7,500 while continuing to pay off the mortgage on their home for less than their existing mortgage. The faxed remortgage quote, supplied by the Mortgage Advice Centre, indicated that a mortgage advance of pounds 34,500, to take over their existing home mortgage and finance the timeshare, could be repaid over a 12-year term for a monthly repayment of pounds 162.45. The couple's existing mortgage is pounds 230 a month. Mr Harmer said they had been assured that if the costs were found to be higher than this they could cancel the contract, though they would lose a deposit of pounds 848.

The day after they signed, the Harmers decided it must be too good to be true and tried to get the agreement cancelled, but were told it was too late. They say they were again told that the agreement would be cancelled if the deal proved to be more expensive than the figures they had been quoted.

"The Mortgage Advice Centre contacted us on our return," Mr Harmer said, "and told us it would be pounds 209 per month in the first year, and pounds 290 per month after that. Instead of saving us money it would cost us a lot more. There were pounds 1,500 legal fees, which we were not told anything about, then valuation fees of pounds 120, and another pounds 500 to pay off the building society mortgage."

Mr Harmer is now facing legal action from the timeshare firm for pounds 6,652. It is refusing to cancel the contract despite the higher costs. Another couple facing legal action have become ill because of stress. In one instance an unemployed couple on state benefit were persuaded to sign an agreement.

Trading standards officers say that the initial mortgage quote is not legally binding - hence it can be increased.

In addition, the contract is governed by Spanish law. There is as yet no "cooling-off" period (during which you may cancel without obligation) applying to timeshare sales in Spain, and one was only introduced in the Canary Islands in July.

Ian Smith, who runs the Mortgage Advice Centre, said that where quotes had been inaccurate it was because potential customers had provided the wrong information. He said he could not guarantee that the full text of a faxed quotation was given to a would-be buyer.

"The clients themselves have not provided the correct information in the first place," Mr Smith said. "We have no idea what happens to the quote. We always recommend that the full quote is passed on to the client."

Robert Murray, the sales manager for Atlas Balear, which sells the timeshares, said: "The mortgage quotes are highly accurate. If any client provides false information that is not our fault. I have had complaints and I have refunded deposits in full." He added that his firm handled 6,000 purchases a year but had few complaints.

The Timeshare Council is encouraging people who have signed timeshare agreements that turn out to be more expensive than quoted to ask banks to accept liability for the transactions, because deposits were paid by credit card. It is also asking banks to review their policy of permitting deposits to be paid by credit card.

John Fox, the Leicestershire trading standards officer who is leading the investigation into the Mortgage Advice Centre, said: "Any reputable timeshare company will give you time to think before signing. If you are being pressed to sign on the day, then don't. Many countries do not yet have a cooling-off period, and before you sign for the timeshare contract make absolutely certain you can afford it."