Back in July Inside Timeshare published the article about Shawbrook Bank setting aside around £9 million, to cover defaults in loans issued by timeshare sales staff. It announced that the bank had not carried out its due diligence in accepting these finance agreements.
The article also highlighted the ongoing high court action brought against Barclay Partner Finance for loans issued for timeshare. These were for the so called “investment” packs being sold by Resort Properties / Silverpoint. Many of the agreements were given without the normal checks being carried out in respect of the clients income or the ability to repay the loans, with many of the applications being falsified in order to get it passed.
Another aspect of the article showed the same thing happening in the USA, with people who did not qualify for normal finance, being passed to a Credit Union. In this case the company was Quorum Federal Credit Union, which would then sign them up as members. These loans accounted for around $40 million for Diamond sales.
It has now been highlighted that sales staff in the US are issuing credit cards, again it is Barclays who are in the picture. Irene Parker, sent the following article.
Barclay card by Irene Parker 10/24/16
There is nothing wrong with travel reward credit cards, but when consumers on vacation get locked into timeshare presentations that can last for hours; credit card lending can turn predatory.
Several banks have come under fire for overzealous sales practices. Wells Fargo and Barclays Bank through Barclays Partner Finance, along with other U.K. banks, have come under regulatory scrutiny and been the subject of lawsuits for a host of reasons, including predatory lending through the use of timeshare developer-sponsored credit cards.
Shawbrook Bank in the U.K. has admitted that it didn’t do its due diligence when approving the finance for vacation ownership products. One of its biggest partners is Diamond Resorts International, a timeshare company that has come under fire for its aggressive sales practices.
Diamond offers a Diamond Resorts Barclaycard Master Card with a 0% promotional six month APR if used for a Diamond Vacation Ownership Interest down payment, along with Diamond Resorts International reward points for other purchases. After that, it is a variable APR of 15.24%, 19.24% or 22.24% depending on creditworthiness.
It is the financing component that often makes people with vacation brain sign a contract on impulse for perpetuity, not even having used the vacation service at the time of purchase. The decision is often based on how well the buyer likes the resort if they aren’t an existing owner. In other words, they may not use the booking program until the next vacation.
As an example, Arthur Saldana, 55, and his wife Sylvia, 49, have been Diamond Resort International owners for several years. They owned a deeded week at the Sunterra London Bridge Resort in Havasu, Ariz., for about 10 years prior to Diamond Resorts International acquiring Sunterra in 2007.
The couple was persuaded to give up a deeded week, one that came with a deed that has a limited secondary market, in exchange for timeshare points that are non-deeded with no secondary market. During a series of five sales presentations over a five-year period, the Saldanas accumulated 30,000 Diamond Resorts International points that elevated them to gold status in 2013.
Sylvia Saldana said that she and her husband signed many contracts, and they thought they were actually helping their children. “We thought that after we paid off the Diamond mortgage our four children would only have to pay maintenance fees,” she said.
But maintenance fees increased to the point where they could no longer afford to own their points. The family soon found that they had to charge maintenance fees to their credit card in order to pay them.
The Saldanas had already taken out a $33,000 home equity loan from their credit union to reduce the high Diamond Resorts International loan interest rate, typically 14% to 18%.
Worse, the children, now almost grown, say that they have no interest in timeshares.
At their last stay at a Diamond Resorts International resort in August 2015, Sylvia Saldana said that a sales agent tried to convince them to purchase another 10,000 points in order to achieve platinum level, which is 50,000 points (Remember they owned 30,000 points).
The sales agent explained that by being platinum, it would allow the couple to pay their maintenance fees with their points, as only platinum members are allowed to use their points to pay maintenance fees, Sylvia Saldana said.
At the time of the 2015 presentation, Diamond Resorts International’s FAQ indicated that as of that year, only platinum members could exchange points for a monetary credit toward the cost of their annual maintenance fees for their collection membership and points and/or dues for the club.
A Diamond Resorts International representative who gave her name as Pamela — these reps aren’t allowed by the company to provide their last names — confirmed that “only platinum members can use their points to pay maintenance fees. Any member can open a Barclaycard to pay fees.”
When we purchased our Diamond Resorts International contract, we were told that the practice of using points to pay maintenance fees isn’t encouraged due to the point value being reduced to pennies on the dollar if used to pay maintenance fees.
The sales agent aggressively tried to persuade the family to open a Diamond Resorts International credit card to pay for the additional points, despite the fact that they couldn’t afford the fees, Sylvia Saldana said.
Arthur Saldana became so angry, he left the presentation.
Fortunately, the couple realized that the credit card wasn’t a prudent solution to their problem.
Thanks to the contract clause protecting Diamond Resorts International from oral representations made by a salesperson, if the Saldanas had agreed to the additional 10,000 points, they would have gone further into debt with little recourse. The Saldanas have a daughter who just graduated from high school and has started college.
In May, Sylvia Saldana contacted a member of the Licensed Timeshare Resale Broker Association and asked if they could sell the Diamond Resorts International points and was told that her only option was to surrender her membership, as there is no resale value.
The Saldanas contacted California attorney Eric Ridley, who has had prior experience with Diamond Resorts International.
Ridley had filed a lawsuit on behalf of Louis Wolff, 81, against Diamond Resorts International on March 8 in California Superior Court. In this case, sales agents were accused of opening and charging $50,000 worth of Diamond Resorts International vacation interests on credit cards opened in Wolff’s name.
“We have in place a strict set of sales policies and practices aimed at protecting the consumer that are in line with industry best practices,” said Frank Acito, vice president of investor relations and financial planning at Diamond Resorts International, according to an 8-K filing with the Securities and Exchange Commission on Jan. 25. “Our company has a zero-tolerance policy for any member of the sales team who does not follow protocol.”
But Diamond Resorts International sends buses to seniors’ communities to take them to Nevada, Ridley said.
And once the company gets hold of a name, there will be a nonstop barrage of phone calls, he said, adding that is what happened to Wolff, as stated in the lawsuit.
There is a reason that banks don’t allow borrowers buying a house to borrow or charge a down payment. It has to do with the creditworthiness of the borrower as well as suitability. If an individual doesn’t have money to pay for the down payment on a house, that person shouldn’t be buying it.
The Saldana family ended up surrendering their Diamond points. Without a secondary market, the family is left with the $33,000 home equity loan after purchasing approximately $60,000 worth of points.
Sylvia Saldana wanted to share their story to warn other people to do their homework before buying any timeshare.
The Diamond Resorts International Barclaycard ranked 15th of 16 travel-related credit cards offered by Barclays, according to a 2015 Frugal Travel Guy ranking. Of the 16, three are timeshare credit cards, and Wyndham Worldwide credit cards ranked fourth and sixth on the list.
Timeshare lending is commonplace in the U.K. as well.
“In order to finance the purchase of a timeshare product, the vacationer is asked to enter into a loan agreement with Barclays Partner Finance. Attendees leave a sales meeting with either points or timeshare weeks entering into an agreement with Clydesdale Financial Services Limited trading as Barclays Partner Finance,” according to blog Inside Timeshare.
One of the reasons that U.K. banks ran into trouble was because of urging people to take out “home improvement loans.” “Pre-arranged lending is arranged through Barclays Partner Finance,” according to Inside Timeshare.
The Consumer Financial Protection Bureau is investigating timeshare company Westgate Resorts. Westgate Resorts challenged the CFPB on jurisdiction, saying that the bureau is overreaching because sales and marketing aren’t part of the lending process. The CFPB denied the petition.
But the Saldanas would argue that sales and marketing are clearly part of the lending process.
We are a charge-it society. But there is no vacation in the world worth taking at 18% interest.
Link to previous article.
Inside Timeshare would like to thank Irene for her article, we hope to publish more of Irene´s insights into the timeshare world from across the pond.
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