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Timeshare Sales and Finance Agreements

Timeshare is not a cheap product, not just the ongoing costs of the annual maintenance fees, the costs of flights and not to forget the money required to feed and water your family during your stay, but the initial cost is high, to say the least. The average cost of a week’s worth of basic timeshare begins around the £10,000 mark, from many of the legal cases we have highlighted that cost has been two to four times that amount.

For those who became involved with Resort Properties which then became Silverpoint, we have seen figures going as high as £100,000, in some cases more. The reason for these high figures, as we now know, was the “investment” pitch, the purchase of multiple weeks and apartments with the promise of a rental income and then a sale of the weeks for a sizable profit.

These never materialised, a fact we can see in the court cases in Tenerife and the subsequent liquidation of Silverpoint. We also know that it did not end with the first purchase, after the two to three year period when the weeks were eventually to be sold, the unsuspecting “investors” were then told the weeks and apartments they purchased were not popular so were not selling.

Never mind, Silverpoint would take them off your hands and sell you better weeks and apartments, and so it went on.

But how were these huge purchases financed, from many of the statements from these victims, they told the sales staff it was not affordable, but that was not a problem according to the salesman. He and his manager can arrange finance, in this case through Barclays Partner Finance.

It was a simple process and the loan application would be granted without any problems, and so it was. By the end of the presentation, the “victim” had purchased the timeshares and signed the loan application. By the time they returned home, BPF had already sent the letter congratulating them on their purchase and for using BPF!

So what is the problem I hear some of you ask?

The problem is very simple, the loans were granted without all the usual checks that one would expect for a loan ranging from £30k upwards.

This is not unique to Silverpoint, other timeshare sales companies used the same technique to “broker” loans for the purchase, the “guaranteed” acceptance for the loan. All were accepted by the various finance companies they used, without question.

The three main finance institutions involved with timeshare finance are Barclays Partner Finance, Hitachi and Shawbrook Bank. Only Shawbrook Bank has acknowledged they did not do their “due diligence” when authorising these loans. They set aside around £9 million to cover any defaults in repayments for these loans and the then CEO was forced to resign. See the link below on their admission.

https://insidetimeshare.com/shawbrook-bank-announce-irregularities-timeshare-loans-similar-activities-usa/

So what do we mean by “Due Diligence”?

Very simply put, it is the lender making sure that their money is secure and will be repaid.

How many of you have gone to your bank or a finance company to ask for a loan for a sizable purchase, it may be a new car, an extension to your home, anything where a large loan is required. From personal experience, the loan was never as straightforward as it has been with purchasing a timeshare.

Apart from the simple credit checks, i.e. any CCJs or defaults, proof of income is required, usually, at least the last 3 months pay statements, for yourself and the wife if you are married. Then there is the all-important Income v Expenditure statement, in this, you will show your monthly outgoings, this is everything, from household bills, right down to what you may spend at work for lunches and coffee per month.

From this and the proof of income they can see if the loan repayments are actually affordable, that you have the “spare” income to cover the repayments without leaving you “short”. In other words “responsible lending”.

Shawbrook admitted they had not done this vital part of the application, they and the other finance companies relied on the information provided by the “timeshare sales staff”, who had a vested interest in making sure the loan was approved.

This is now where we have a problem.

It has always been the way in most sales and especially timeshare, that they are commission-based, in other words, no sale no pay. Some timeshare sales did pay a very meagre “basic” but in many instances, these were based using the old “On Target Earnings”, you don’t make your target you don’t get paid.

This means that the pressure to get you to purchase is going to be even stronger, no matter how you may try to explain you cannot afford the price, the loan option is always going to put more pressure on you to sign.

We must also not forget that the salesman also receives a commission from the finance company, so it is a double-dipper for them. Somehow I see a very “unfair relationship” here, the salesman wants the sale and the lender wants the business. After all, the total repayment is around double the original purchase price, these loans are not cheap.

A Typical BPF Loan Agreement showing the total cost of the timeshare with interest.

For the finance companies to rely purely on the information supplied by people with a vested interest in making the sale with a loan, is in our book totally irresponsible. At least Shawbrook admitted as such.

So far in all the cases that Inside Timeshare has seen on this subject, not one client has ever had to show any written proof of income or have had to provide an “income v expenditure” report. At no point has any of this information been provided by the lenders, even though upon request they must produce it, they have not even been able to produce any of this information on the loan application provided by the timeshare sales.

This would suggest that there is a very serious problem here, it also becomes more serious when we look at the loans and the timeshares they were used to purchase. The vast majority were made in Spain, which with their very strict and consumer-friendly timeshare laws, these loans were used to purchase a product that has been deemed illegal according to the law.

For these institutions to be a party to the underhand sales techniques used in timeshare makes them in our opinion worse than the timeshare companies. We have to ask the question, were the finance institutions duped into these loan agreements by timeshare or was it just greed on their part?

Somehow I think your answers will be the same as mine, GREED!

If you purchased a timeshare in Spain after January 1999, then your contract may just be illegal, if you would like to know for certain and the purchase was also made using a finance agreement, then please use our contact page and Inside Timeshare will get back to you.

Timeshare Loan Agreements

One of the main enquiries from many readers regarding their purchase of timeshare has been the loan agreements to conclude the purchase. These are invariably brokered by the sales staff themselves and are a very important tool in their arsenal to ensure a timeshare sale. After all, most timeshare sales reps only get paid commission on successful sales, so the loan agreements will boost sales from those who could not actually afford the purchase price. Plus they will also receive a commission for brokering the agreement, so for the timeshare sales reps, this is a very lucrative tool.

You have all been there, attended a sales presentation either for the first time or for an “upgrade” meeting with the in-house reps. The product is laid out before you, the sales patter begins and you are now in the grip of a rep who has only one goal, to sell you a timeshare or an upgrade.

You can claim until you are blue in the face that you cannot afford the timeshare or upgrade, but that will not cut any ice with your rep.

The product will be shown in its best light, they will pressure you into wanting the timeshare or the upgrade, that it is something that will only give you great holidays and enormous amounts of pleasure. You really can’t do without it.

Enter the final part of the sales pitch, “what if I can make this affordable”?

I am sure you have all heard that one.

Enter the loan agreement, this will be with either the sales companies own in-house finance or more than likely with one of the major lenders such as Barclay Partner Finance or Hitachi.

The sales rep or his manager will explain very briefly the loan agreement, that it is “guaranteed” to be accepted, once you sign the agreement, by the time you arrive back home from your holiday you will receive a letter welcoming you to whichever company and for taking out a loan with them.

Not bad, a quick loan and you now own the timeshare or have upgraded. There is only really one big problem, can you actually afford the repayments, did you complete an “expenditure v’s income” report to show that the prepayments are affordable and do not leave you short?

In all the loan agreements which Inside Timeshare has come across, these reports which are a basic part of taking out any loan have never been done. The question we have to ask is what sort of credit checks have been made after all these loans are very substantial, the average is around the £20,000 mark?

It should also be noted that it is not just the cost of the timeshare that needs to be taken into consideration, but it is also the very high-interest payments. In most cases that we have seen the amount to repay back is almost or more than double the original purchase price, so why have there not been stringent credit checks and affordability checks?

The answer is pure and simple, greed.

One question that Inside Timeshare has asked on many occasions, especially the older purchasers, had you gone to your bank for a loan of this size to purchase timeshare, do you think your bank would have given it to you without all the stringent affordability checks, or even due to their age. Every answer was the same, no they would not have approved the loan.

It is also a fact that Shawbrook Bank back in July 2016 announced they had found “irregularities” in their “due diligence” on approving loans for timeshare. They had not done the usually required credit checks or affordability of repayments. They set aside £9 million to offset any defaults on these loan agreements. The CEO of Shawbrook at the time had to also resign.

This is not a subject that is new to Inside Timeshare, below are links to other articles on this subject, one of the biggest finance companies which have found themselves the subject of many court cases is Barclay Partner Finance. They infamously provided all the finance agreements for one of the biggest frauds in timeshare history, the loan agreements for the Silverpoint “investment packs”. On average the purchase of these packs have reached over £60,000 and that is without the interest!

There are ways that these loan agreements can be challenged, but that does need the case to be taken to a UK court by a competent and experienced lawyer in this field. The one-piece of legislation which is being used is Sections 140a & 140b of the Credit Consumer Act 1974.

Basically, this covers the “unfair relationship” between the broker (sales staff) and the loan provider. The fact the sales staff require the loan agreement to make the sale creates a very unfair relationship against the consumer. After all, he needs to earn his commission.

Inside Timeshare has also come across readers who have made an arrangement with BPF to reduce the amount being repaid, this does sound like a good idea if you are struggling, the unfortunate thing is that BPF will place you on a defaulters register and that will affect your credit rating. One reader is going through this at the moment, it is stopping them from getting a mortgage, so the wonderful image of a timeshare purchase for this reader has turned into an even bigger nightmare.

Inside Timeshare just wonders how many thousands of people have been caught up with purchases made by loans brokered by the sales staff, we also wonder how many of these have now lost all credit ratings due to being unable to afford the loans. This is a problem which has been going on for years and yet we see nothing from any of the regulatory authorities such as the Financial Conduct Authority siding with the consumer, they just seem to be siding with the finance industry. (See yesterday’s article)

The sooner the finance companies do what Shawbrook Bank has done and admit they have made very serious errors in their “due diligence”, the better it will be for all those caught up in these high-interest loan agreements.

Past articles on the subject of loan agreements 

https://insidetimeshare.com/shawbrook-bank-announce-irregularities-timeshare-loans-similar-activities-usa/

https://insidetimeshare.com/timeshare-finance-barclays-hot-water-high-court/

https://insidetimeshare.com/timeshare-claims-using-the-credit-consumer-act-1974/

Friday’s Letter from America

It’s Friday! Time for another Letter from America, this week one of our advocates writes an open letter to an industry advocate, Irene Parker provides the introduction, but first some news from Europe.

Those nefarious fake lawyers from Tenerife are at it again with another new twist to secure your money. This time it is from Armando Gareca Abogados, one of the new names in the Litigious Abogados family, thank goodness this reader decided to search the web before paying any money and found our articles.

armando-gareca-abogados-logo-1

This particular reader was contacted by Armando Gareca and informed that a case had been lodged with the court against their timeshare resort, not bad considering the courts are closed in August. They were informed they could become part of this case and once they paid the Procurator fees of 1,012€ the case would proceed. It all sounded very good, they were told how much they would be getting back and when they would receive it. Obviously this law firm has a crystal ball and can tell the future!

As we said the courts are closed in August, but also they have expanded their jurisdiction, the Spanish courts and these so-called Spanish lawyers now have the power to take a Greek resort to court in Spain. Not only that Spanish law is applying to a purchase made in Greece!

So just to recap, if you purchased your timeshare in Spain or any of its territories, then Spanish law will apply, if you purchased in the UK, Malta, Portugal, Greece or anywhere else in the world, then Spanish law will not apply. Also it takes at least 12 to 18 months to get a case to court, there are some lengthy procedures to go through before it gets to trial, so the promises of this particular group that the case is being heard within weeks are false.

We have also had some enquiries regarding finance for timeshare purchases arranged by the sales staff, many of these are with Barclays Partner Finance or Hitachi. Some of our readers who have been contacted by various claims companies are told that once they sign up for legal action, they will have the loan stopped and the interest repaid.

This is a false claim, the timeshare resort acted as a broker for the finance, your agreement and contract is a personal one with the finance company and nothing to do with who sold you the timeshare. If you are taking legal action against your timeshare company, the loan is a separate issue, which can only be dealt with after a successful outcome against your resort. By stopping any payments to the finance company you are then leaving yourself open to legal action by debt collectors and subsequently receiving a CCJ, or County Court Judgement. This will have a devastating effect on your ability to get any credit, even being able to get a mortgage.

So beware of many claims, these people will play on your emotions, make promises that are not there, it pays to to check and double check. Do your homework!

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Now we move on to this week’s Letter from America.

An Advocate’s Open Letter to an Industry Advocate

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By an Advocate

Introduction by Irene Parker

August 25, 2017

The following is a letter submitted to Inside Timeshare written to a timeshare industry proponent by one of our Timeshare Advocates. The letter is in response to an article the author wrote posing the question as to whether the timeshare industry needs to look in a new direction.

The letter writer asked that he not be identified and that the title of the article not be mentioned as this was a personal letter written to the author. One thing sorely lacking is dialogue between critics and proponents of the right to use timeshare product which can be financially devastating for a family when the resort denies their release and when no secondary market exists.

Following the article I have offered comments agreeing and disagreeing with both the author of the article and the letter writer. We encourage others to weigh in.

Thank you to our Advocate reaching out to the industry. We hope he receives an answer.

QA

In your article you state, “Timeshare is definitely not a real estate investment and apart from the occasional overzealous sales associate, timeshare companies long ago stopped pitching it as such an investment.”  While I agree with your assessment that it is not an investment, I must ask, are you saying timeshares are not real estate or are not an investment?  I also read other timeshare articles you wrote. You are knowledgeable, but I believe you missed some of the key issues a potential buyer of the product needs to understand. You are not the only financial timeshare writer glossing over two important issues:

  • Timeshares have no viable secondary market,
  • The timeshare product has evolved to no interest in real property.

Consider the potential impact on the industry, or better stated, why the issues have not yet impacted the industry.

You rightly state in your article, timeshares are overpriced and there is no appreciated value in the real estate. I wish you had made it clear, that once purchased, a timeshare has no value. You must be aware of the fact that there is no viable secondary market. With little data available (the industry controls it), I find the “sale” of most timeshares on the secondary market require the seller to bring money to the transaction. That equates to a negative value.  

Recently, in an effort to avoid increasingly ugly publicity, many of the largest players are offering a “give back” or “surrender” option to older owners, not actively using or able to use their timeshare, provided the associated home facility is viable and the product is fully paid. These guys are such good sales people they have actually been successful in improving their image, offering certain members in select properties the opportunity to give back their timeshare to the developer with nothing in return other than to escape their burden. The timeshare interest they bought for $20K to often well over $100K is given up for nothing so the developer can resell as new.  

The non-viable secondary market environment is no accident. It certainly is not caused, as ARDA would have you believe, by an oversupply of inventory, or the result of advocacy groups and “sell your timeshare” type organizations that illegally prey on owners. ARDA has long acknowledged the lack of a viable secondary market and has for years committed to fix it. While out of the public eyes, ARDA does nothing, even works not so secretly against efforts to raise a secondary market.

I am sure you have read industry 10Ks. In most every 10K I have read for the past 15 years, the existence of a secondary resale market would have a significant negative impact on developer earnings. It’s no surprise the industry is active in suppressing the market to eliminate their perceived risk. I just wish our consumer protection guys, wherever they may be, would mandate the same level of discourse for the individual timeshare buyer.      

I also wish you had not implied a timeshare interest is necessarily tied to a real property interest (and again the industry should be required to disclose this to potential buyers). The classic deeded timeshare is today by far the minority of sales. Timeshare consumers buy either an interest in a “user rights” trust, not the underlying real estate, or simply buy into a timeshare “club” arguably not a timeshare at all. Many in the industry call them vacation clubs.

Please understand my criticism of your piece is meant to be constructive and more importantly, intended to spur some additional interest on your part by examining the member’s perspective. Few consumers really understand the product and/or business model. The consumer protections guys are asleep at the wheel or have no mandate/political incentive to get involved, and the industry will not speak up for fear of risking a very profitable business model born on the backs of timeshare buyers fallen victim to the oral representation clause, locked into a perpetual contract. It’s tough for the consumer or the industry to get the real picture.

Have you had a chance in the past several minutes, as you struggle through my letter, to consider my question about the implications of the issues presented?

  • No secondary market,
  • Inadequate regulation,
  • ABS markets,
  • Cash flow should the issue of a non-equity product make the light of day,  
  • Inadequate disclosure as to the lack of a secondary market.

I am right?  No?

Well, I will end now and hope you do consider the implications of what I touched on. If I have sparked any additional interest on your part I’d like to talk more. Please call or write.

Respectfully,

An Advocate

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I would like to add a few comments to some of the issues raised or not raised by the letter writer and the article’s author.

First, I disagree with the article’s author in his statement that only a few overzealous timeshare sales agents sell a timeshare product as an investment, as the US side of Inside Timeshare continues to receive complaints almost daily from our readers reaching out to us for assistance after they allege being sold by deceit, concealment, violation of trust and bait and switch, meeting the definition of White Collar Crime, Financial Institution Fraud. Timeshare sold as an investment, told it would be easy to resell, is still one of the top five complaints.

We always want to acknowledge sales agents and developers trying to exist in a timeshare world so ingrained in deception on the front end of the sale. The 7,000 plus timeshare members belonging to five Bluegreen and Diamond Resorts Facebooks are filled with posts concerning allegations of deceit.

Second, surrender programs are no help to the majority of timeshare members that have reached out to Inside Timeshare because these members allege they were duped into signing up for high interest rate loans and credit cards. High 25% interest rate credit cards now can pop out on site like toast out of a toaster. Multiple credit cards are often opened.

As to a secondary market, we have heralded Disney Vacation Club as a company that allows an acceptable secondary market.

http://insidetimeshare.com/mid-week-report/

This is where the letter writer and I disagree. Licensed Timeshare Resale Broker Judi Kozlowski of RE/MAX would argue Hilton also has a solid secondary market in that they don’t punish the secondary point buyer to the extent other developers do. Judi has been working the Hilton Grand Vacation timeshare resale market since the beginning of their current resale program.

“In my opinion, Hilton has the best resale market out there – the developer does not punish the resale deeded points buyer. Buyers of points on the secondary market are rewarded with the ability to join the Elite Club. They are still allowed to use the open season rates, trade internally and use RCI through Hilton.”

Third, I disagree with the letter writer in that he states ARDA has stated they want to fix the secondary market problem. I think that is old news from a 2014 RedWeek article. In recent statements, ARDA CEO Howard Nusbaum has stated timeshare is a right to use produce so members should not expect any value back. My rebuttal is that if timeshare is now defined as a country club of sorts, why is the contract perpetual? What country club is out there you can’t quit? What country club, except for the likes of Mar-a-Lago, requires an initial payment of often $50,000 or more?  What about the consumer that has turned over $50K to sometimes over $100K only to learn two weeks later they allege they were lied to as showcased in several of our Nightmare on Timeshare Street articles.

The letter writer mentioned Advocacy groups. I would like to make a distinction between real advocates and scam artists that call themselves advocates, including some law groups. We have 93 timeshare members helping other members I consider real Advocates. We also have 55 Advocates, including several attorneys and professionals, who donate their time pro bono to offer an assessment or opinion after the resort has denied the member relief.

Thank you to our letter writer and to all our Contributors. Your voice is important because one or two voices alone do not a concert make. Contact us or one of the Bluegreen or Diamond Facebook pages if you need assistance, would like to share your timeshare experience, or express your opinion.

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Timeshare Advocacy Group™

https://www.facebook.com/timeshareadvocategroup/

https://www.facebook.com/groups/DiamondResortsOwnersAdvocacy/

https://www.facebook.com/groups/180578055325962/

There we have it, the end of another week and the start to what we hope will be a great weekend. Inside Timeshare thanks all those who contact us with information and enquiries, it is with your help we can bring those issues to a wider audience. Keep them coming.

Have a great weekend and join us again next week.

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