Timeshare scammers' new tricks snare the unwary

Loyalty cards and cashback schemes are just two of the fresh ways to get your money, says Chiara Cavaglieri

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The Independent Online

Licking the timeshare industry into shape has proven to be something of a whack-a-mole game at the fairground – you sort one set of problems out only for sneaky salesmen to pop up with different tactics to rip people off.

Horror stories have been well documented over the years with holidaymakers pressured into handing over lump sums by aggressive selling tactics, or falling victim to fake companies.

Typically, when you buy a timeshare, you are paying for the right to use an apartment on a resort for a given number of weeks each year. Particularly popular in the 1980s, Britons snapped up timeshares in Spain and Portugal, but soon found they were locked into contracts, either for a fixed number of years, or more commonly "in perpetuity", paying high annual maintenance charges (which often increased substantially each year) for a holiday home they no longer wanted.

Trying to sell up is nigh on impossible. Timeshares aren't an investment and do not appreciate in value – even if you can sell, perhaps back to the original timeshare company, you can expect to be out of pocket. Even worse, there are plenty of bogus resale companies offering to find someone willing to take it off your hands, asking for an upfront payment and then scarpering with the cash.

An EU directive introduced last year, which brought in a universal 14-day cooling-off period and banned firms (including resale companies and holiday clubs) from taking money upfront, provided a welcome boost in consumer protection, however, fraudsters have been quick to find other avenues.

"The rules were designed to give the best-possible protection for consumers in the modern holiday market, and to stop rogue traders from being able to exploit loopholes in the law," says Sonia Payne, the director of the UK European Consumer Centre (UK ECC). "But as time has gone on, traders have adapted new schemes to part honest UK consumers from their hard-earned money in the timeshare and holiday club market."

Traders are using fresh tricks regarding loyalty cards, cashback schemes and legal services, with figures from UK ECC showing that complaints about these areas increased by 6 per cent in the 20 months since the directive was introduced in early 2011.

Cash-back schemes are used by firms to entice consumers into buying timeshare or holiday club products, promising that they will get all their money back in a given number of years. Dodgy salesmen talk up guaranteed paybacks from third-party firms, but when it's time to make a claim for that cash, you are rejected arbitrarily and the original holiday or timeshare club washes their hands of it as well. You might never see a penny back, or at best, get a small percentage of what was originally promised.

With loyalty cards you are lured in with free or cheap holidays, only to find you have been tied to a contract, usually involving a fee, that forces you to book your holiday as a club member (and therefore subject to the scheme's potentially onerous terms and conditions).

One of the biggest problems, however, is that people saddled with unwanted timeshares are highly vulnerable. Desperate to recover some of the money they've lost, they are then targeted again, this time by legal services who say they can help with the resale of their timeshare/holiday club product but simply take the money and run.

"In these financially challenging times, consumers are more likely to grasp at straws to recover some of the money they've already lost in deals that have gone sour. We would urge consumers not to be drawn into such schemes," says Ms Payne.

Despite the long list of potential problems and scams, legitimate schemes can work well for some people and there are still popular timeshare hotspots in the Canaries, mainland Spain and Finland in Europe. The market is also big in the US, particularly Florida, but also in Mexico and Thailand.

The EU directive is a big help and only last month, here in the UK, the High Court closed down seven companies following concerns about their trading methods, but you can do a lot to protect yourself too.

Start by checking that the company is a member of the industry trade association Resort Development Organisation (RDO) or the American Resort Development Association (Arda). Never part with money upfront, which is now illegal, and just say no to cold callers – a legitimate one should have no need to drum up business in this way.

Check any paperwork carefully, making sure you fully understand your rights and obligations in terms of both the length of the contract and the annual maintenance fee, which could increase steeply over time. Any promises made to you at the point of sale should be included in this contract and if they aren't, remember you are legally entitled to back out.

"Consumers should not deal with a company that forces them to sign on the day; does not allow a 14-day cooling off period after signature; insists on taking a deposit or other money upfront; promises they will make a profit on resale," says Sean Lowe of the timeshare exchange company RCI. "Timeshare should never be promised – or purchased – as a financial investment. It is an investment in a lifestyle and lifetime of holidays".

Above all think carefully about what you are getting for your money. Do you really want the same holiday every year? Will you be able to afford the maintenance fees when you retire, or if you lost your job?

"Reselling the timeshare is hardly an option, despite what buyers are sometimes told in the initial sales pitch," says Richard Way, the editor of the Overseas Guides Company (overseasguidescompany.com).

"There are channels to resell, but most ownerships have a much lower value than what they were originally sold for and, in some instances, the ex-owner in theory can remain obliged to pay the ongoing annual maintenance fees."

Be aware that companies have in the past stated timeshare ownership is a cheaper way to holiday, but they don't always present costs on a like-for-like basis. You may find that it is far cheaper and less stressful to simply book a conventional holiday each year as and when you can afford it.