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Office of Fair Trading

Friday’s Letter from America: Timeshare Foreclosure

Welcome to this week’s edition of Letter from America, this week Irene Parker answers a question asked by many consumers when it comes down to loans/mortgages for the purchase of timeshare. This is very much a problem for our US readers as in Europe and especially in the UK all loan agreements are considered personal loans to purchase a product, any default on the loan agreement is a civil matter and is dealt with by the County Courts. The courts can order the repayment or send in the bailiffs to seize personal property to the value of the loan. The timeshare will not be seized as the loan is not collateralised by the timeshare, after all, it is worthless.

There are not many figures available on County Court Judgements made for defaults on these loans, mainly because they are listed as personal debts not attached to anything but a debt to the lender. For instance, you may have taken out a loan for home improvements, this is treated exactly the same as a loan for timeshare. It should also be pointed out that a County Court Judgement commonly known as a CCJ destroys any credit rating and will prevent you from getting any further finance. Now, considering the average age of timeshare purchasers, they are of a generation that will pay off these defaults as a debt is a debt and to receive a CCJ is out of the question. It should also be pointed out that even if consumers receive a CCJ, they are unlikely to advertise the fact on these timeshare forums, after all, it could be very embarrassing.

Is a Timeshare Foreclosure an Installment Loan Foreclosure or a Mortgage Foreclosure? 

See the source image

Is a Timeshare Foreclosure Considered Mortgage Foreclosure? 

https://gustancho.com/timeshare-foreclosure-considered-mortgage-foreclosure

On the credit report yes, but not with mortgage lenders:  Per HUD mortgage lending guidelines, a timeshare is not treated as a regular foreclosure and is treated as consumer debt. 

The U.S. Department of Housing and Urban Development (HUD), the parent of FHA) classifies timeshare mortgages as installment loans and not real estate loans.

By Irene Parker

July 23, 2021

Over the past year, there have been six disturbing reports that indicate timeshare developers are becoming more aggressive in pursuing members who default on loans. If the reports listed below obtained from credible sources are accurate, timeshare buyers should NEVER finance a timeshare, and timeshare attorneys will be provided substantial job security. If you get sued, you need an attorney. There is nothing to prevent a timeshare company from suing a member, but it is more difficult to collect on a timeshare judgment as the loan is not collateralized with anything but the timeshare.

Last week on TIMESHARE TALKS Jessica Burke of Virginia Beach Timeshare Rentals discussed the benefits of renting timeshares. Renting avoids the initial outlay, and more importantly, gives the consumer time to evaluate different timeshares so as to make an informed decision as to which timeshare might be right for their family. Host John Raymond is a licensed timeshare broker and founder of Resort Reseller. Timeshares can be purchased on the secondary market for a fraction of the cost.  

https://tarda.org/f/should-i-buy-a-timeshare-or-rent-one

The lead spokesperson for ARDA-ROC, the timeshare industry lobby’s consumer advocacy arm, encouraged judicial foreclosure in about-face quotes:

“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.  (Contacted about the meeting notes, ARDA did not dispute their authenticity but said that in the minutes, McKelvey’s quotes were taken out of context.)

At a 2019 Florida legislative workshop I attended, Mr. McKelvey testified:  

“Most of the developers I know and certainly most of the timeshare managers I know, and I managed timeshare properties for thirty years… every single resort had a dissolution policy, every single one (one). There was a way to get out. You had to come to your management company, and based on what the board of directors instructed us to do in the terms if they had to pay a fee or if they had to be current, whatever those situations were, we did not have a one that did not have a dissolution policy and a hardship policy….” 

Timeshare members donate $5 to $10 per contract to ARDA-ROC in mostly “opt-out” donations. These donations are not as voluntary as they sound. When I asked that the $7 not be charged to my credit card along with my maintenance fees, it was charged anyway. When I called to ask that the $7 be removed, I was told they had to fill out an internal form to do so. That was back in January. Another member recently reported they had to call three times to have the $7 removed. Collectively, ARDA-ROC raises approximately $5 million a year from members.  

Following are five additional disturbing reports:

  1. One developer’s contract used to specifically state that they do not pursue summary judgments. That language has been removed.
  2. Eric Olsen, an attorney of 42 years, was quoted in Kiplinger, to the ire of timeshare developers, when asked what happens when someone stops paying: “I ran this often-asked question by Salem, Ore.-based attorney Eric Olsen, founder of HELPS, a national nonprofit law firm that helps lower-income seniors with debt they can’t afford to pay. Olsen concluded our interview by urging readers to, “Consider walking away from the timeshare, as they generally have no value. Stop paying and ignore their communications.   It will eventually get foreclosed and owing any deficiency is highly unlikely.” Kiplinger, April 26, 2021  
  3. Westgate’s VP of Mortgage Services stated in recent court documents that Westgate “probably” has a 30% default rate. Westgate’s lenders can’t be happy with that high default rate. Other developers have default rates that exceed 20%.
  4. Hilton Grand Vacations and Orange Lake/Holiday Inn have sued members defaulting on loans, according to one exit provider.
  5. Another source reported an upsurge in attorney hiring.    

What does this mean to timeshare members and owners?

According to HomeGuidesSF:

The company may sue you in civil court to obtain a judgment. If the judge issues a judgment against you, the management company may garnish your wages or levy your bank account to get the money you owe.

Deeded timeshare owners face a different dilemma. If you stop paying on your timeshare loan, you face foreclosure. Foreclosure is the process whereby the lender files to take possession of the property and sell it at auction to recover the money you owe. There are two main types of foreclosure: judicial and non-judicial foreclosure. In a judicial foreclosure, the lender files a foreclosure lawsuit and takes you to court. The judge may issue a deficiency judgment for the remaining balance due after the auction. A non-judicial foreclosure is basically a paperwork shuffle. Your contract authorizes the trustee to sell the timeshare in the event you stop paying on it. You receive the official Notice of Default and the Notice of Sale. In California, the majority of foreclosures are non-judicial foreclosures where the lender cannot receive a deficiency judgment after the sale of the property.

https://homeguides.sfgate.com/can-sued-not-paying-timeshare-51679.html

Yahoo Finance reporter Abigail Fisher recommends timeshare stocks because consumers are tricked into signing contracts they can’t get out of: 

Best Stocks to Buy According to Hedge Funds

We find evil companies to be a very rewarding hunting ground to uncover long-term stock winners. In our opinion companies like Philip Morris (PM), Facebook (FB), Apple Inc. (AAPL), Alphabet (GOOGLE) are evil companies that delivered 1000% or more gains to their investors.

In this article we are going to look at another set of evil companies that use high pressure sales tactics to trick consumers into signing complex long-term contracts that they don’t understand: timeshare marketing companies. Check out this Reddit post where the user is asking several questions about Wyndham timeshare cancellation. This person was able to cancel and receive a full refund, but many consumers don’t cancel within the 7-day or 10-day window specified in their contracts.

https://finance.yahoo.com/news/best-timeshare-stock-buy-according-135051667.html

How would this reporter feel if the buyer tricked, was her grandmother? Tiffany’s parents were kept for 11 hours, their IDs withheld. They lost their two deeds they had since 1998, and $34,000. They were told that if they didn’t convert their deed to points, maintenance fees would increase from their current fees of $2,000 to $6,000. The transaction resulted in maintenance fees of $6,000 which they could not afford. Tiffany’s interview: 

https://tarda.org/f/how-giving-up-deeded-timeshares-turned-into-tragedy

Many timeshare members and owners, who report unfair or deceptive sales and marketing practices, are senior citizens in their 60s, 70s, some in their 80s and 90s. They have maintained lifelong high credit scores, but are faced with little choice but to default on a timeshare loan if the resort dismisses their complaint because they signed a contract. There is little to no secondary market. Coupled with interest rates ranging from 12% to 20% (higher if credit card financing), a timeshare can become a financial nightmare. About a third of those reaching out are younger. The youngest was 19 and pregnant when she signed a perpetual timeshare contract at midnight – after a six-hour presentation.

Timeshare members can negotiate directly with their resort to resolve a dispute, but expect to be challenged with: 

  • You signed a contract,
  • Your allegations are unsubstantiated, 
  • We are not responsible for what our sales agents say,
  • You didn’t question this on the recorded closing (because you believed the sales agent or were coached on what to say or not say). 

How can this posturing and ongoing war between developers and those providing exit services be healthy for the timeshare industry? 

People, members of the media, and even the Federal Trade Commission have started addressing why thousands of members reach seeking release from an unwanted timeshare. The FTC lists Timeshare Sales at #7 on their current Top Ten Scam list and Timeshare Resales (fake buyers) #10.

Related Articles: FTC:  Timeshares: Yes? No? Maybe?

https://salinapost.com/posts/5de93b95-4ba0-4acb-8527-80dd7effccaf

Top Ten Scams

https://www.aarp.org/money/scams-fraud/info-2020/ftc-top-scams.html

Senior Defaults

https://www.linkedin.com/pulse/senior-timeshare-defaults-irene-parker/

HOAs Benefit from Onsite and Offsite Timeshare Resale Programs

https://tarda.org/f/hoas-benefit-from-onsiteoffsite-timeshare-resale-programs

Thank you Irene, a very interesting article and I hope it helps to answer some of the questions we receive.

It should also be pointed out that in the UK, one bank, Shawbrook Bank, did acknowledge a few years ago that they did not carry out their due diligence when authorising timeshare loans, meaning many agreements were signed without the affordability checks. The bank set aside around  £9 million to cover any defaults on these loans as they would have had great difficulty in enforcing these loan agreements in the County Courts. The CEO at the time was forced to resign as he was the one that arranged the agreements with the timeshare companies.

Another point is all timeshare sales companies must be authorised in order to broker these loans, before April 1st, 2014 these would have been authorised by The Office of Fair Trading and from that date by the Financial Conduct Authority. A case that Inside Timeshare has been following was the validation of these agreements by Barclays Partner Finance for loans brokered by Azure Service Ltd who were not authorised. This validation order would legalise the loan agreement and make it enforceable in law.

Inside Timeshare has already uncovered many timeshare companies who brokered loan agreements with various lenders and have found that the vast majority have never been authorised. This investigation is ongoing and is being used to end loan agreements.

That is all for this week, have a great weekend, and join us again next week for more news and information on the murky world of timeshare.

Start the Week: False Information; BPF and Azure; and Ona Group Lose in Court

Welcome to the start of another week with Inside Timeshare, once again we received many emails from concerned consumers being contacted by various “exit & claims” companies with some rather odd stories. We have also received one email from a gentleman outlining his own story of a loan agreement brokered by Azure with Barclays Partner Finance. It really does show some very underhand tactics not just by Azure but also BPF. We also bring you the news from the courts which came in late on Friday.

We begin today with comments from several readers who have been contacted by different “companies”, all telling them the same story, which leads us to believe that they are all working together.

In all these cases the “timeshare owner” is actually an ex-owner as they have had their contracts relinquished directly with their resorts, along with official notification of termination from the resorts themselves. The “owner” has also returned their membership certificates and have not been billed for maintenance for several years, in one case they “relinquished” 6 years ago.

Yet they are being told that these “terminations” are not valid and they are still liable for maintenance payments, with the arrears being passed to a debt collection agency in the UK. The one name that comes up is one that is well known by timeshare owners, Daniels Silverman, which we know has been used by many timeshare resorts for debt collection, most notably Diamond.

Part of the pitch is to get you to “sign up” with them and to pay for a “termination” and then they will make a claim for mis-selling!

Once again we ask how is the claim being made?

If you have terminated your contract no case can get to court, the contract must still be live with all maintenance paid to date.

If you have terminated your contract and have the documentation, plus have not been billed for maintenance, please be aware that this is a tactic to “scare you” into paying.

Moving on to Azure and Barclays Partner Finance.

Over the past few months, Inside Timeshare has been highlighting the problems of loans brokered by Azure on behalf of BPF, when they were not authorised to do so. These loan agreements cover a period from 1 April 2014 and April 2016. This date is significant as the Financial Conduct Authority only assumed responsibility for “authorisation” from 1 April 2014, previously it was the Office of Fair Trading that was responsible.

So we ask the question: Were they authorised by the Office of Fair Trading?

In the case of our reader, this was the main point of his question, unfortunately, at present, we are unable to give a definitive answer.

In 2010, our reader attended a presentation at Golden Sands, during his purchase he was unaware that he had applied for a BPF loan, he maintains that he has never signed that “application” and the first he knew of the loan was after returning home and received the confirmation that the loan had been agreed and that Azure had been paid. Have his signatures been “forged”?

He has never had to provide any information as to the affordability of the repayments such as the normal “income v expenditure” report, which we consider is all-important especially for a loan of this size. The cost of the timeshare was over £20,000, he was also 64 years of age at the time.

Another point is that just four months earlier he had been made redundant, had to sell his house and had to move in with family.

At the time there seemed to be nothing he could do about the loan, he was out of time to cancel the contracts with Azure and BPF as he was now out of the statutory cooling-off period.

This is just another example of the complicity between Barclays Partner Finance and the timeshare sales teams in extending these loan agreements. You sign on holiday, by the time you return home and find out about the loan agreement it is too late.

Inside Timeshare has no reason to doubt the authenticity of this reader’s story, after all, it follows the same one that Inside Timeshare has heard many, many times over the years.

The Court House Palma de Mallorca

We now move to the latest results from the courts, this one is not our old friends at Anfi, just for a change, this case was heard at the Court of First Instance Number 18 of Palma de Mallorca and is against the Ona Group.

The companies cited on the lawsuit are:

Restotel SA;

Medhotel Group SL;

Ona Group ;

Grouphotel Hotels Resorts.

In this case, the Court has declared the contract null and void an order to repay the client’s 32,201€ plus legal interest.

The award is made up of the initial cost of the purchase which was 22,781€ plus an additional 9,420€ in respect of the illegally taken deposit taken with the statutory cooling-off period. Which is double the amount taken.

The English client, in this case, was represented by Canarian Legal Alliance, we have yet to see if Ona Group payout voluntarily or if they will appeal, using the same tactics as Anfi in delaying payments. So watch this space for news on this.

Well, that is all for today, if you have any questions or comments on this or any other article please use our contact page. If you would like to know your legal options regarding either claims or exit of your timeshare, again use our contact page and Inside Timeshare will get back to you.

The Tuesday Slot: FCA, BPF and Azure Recap

Following on from yesterday’s article, Inside Timeshare has already received many comments from other members who identify with our story on how they were sold the Azure “timeshare investment weeks”. Their stories are identical to those we have heard from Silverpoint clients, after all, Azure is part of the same group of companies and was the sister company to Silverpoint. What Silverpoint sold in Tenerife was soon put into practice in Malta. This also included the brokering of huge loan agreements through Barclays Partner Finance, again without the “due diligence” of the finance company over the affordability of the loans and repayments.

This is a point which the Financial Conduct Authority who is supposedly charged with “policing” the finance industry and ensuring that consumers are protected are failing miserably. All they see are the loan agreements, they have no clue as to how these agreements are sold and brokered by the very people lying about the product they are selling. The FCA fails to recognise that the sales staff will do and say anything in order to finalise the sale and that includes lying about the loans.

The regulation of credit agreements and consumer protection was originally carried out by the Office of Fair Trading, they relinquished control to the FCA as of 1 April 2014.

The OFT was not a ministerial department and was responsible for the regulation of consumer credit since 1973. When it was closed down it passed the responsibility of its various functions to other organisations and departments with consumer credit going to the FCA.

Unfortunately, the FCA does not appear to be geared up to deal with the complexities of this area of consumer protection. In a recent article published by The Mail on Sunday, This is Money page by Jeff Prestridge, he highlights the many failings of the FCA.

In two telling paragraphs, Jeff states:

“a lack of training for staff whose job is to supervise the firms under the regulator’s watch. Lax processes in place for acting upon complaints brought to its attention by the public or those working in financial services. And staff employed to monitor companies’ marketing material without formal training in how to spot anything suspicious.”

And

“Most damning, it quotes an official working for the regulator’s supervision division who admits:” ‘I don’t believe to the best of my knowledge that there is much training around how to identify financial crime.’

Link to the This is Money article.

https://www.thisismoney.co.uk/money/comment/article-9070435/JEFF-PRESTRIDGE-FCA-let-investors.html?fbclid=IwAR3M0bPZrnghdan3Ae5zxaGP17CHfiwYQ5llR0V0ELMTzic-j9XZD_3-72E

So how are they supposed to protect consumers when their own staff have no idea what they are doing?

Is it just a rubber stamp job?

Now according to the FCA, Azure Services Ltd had been “overlooked” as an “authorised” company for the brokering of loans when they took over on 1 April 2014. If so then the Office of Fair Trading must have had them as “Authorised”, or were they?

How did they find out Azure was not authorised, did they find out themselves or was it that BPF informed them in order to have the loan agreements validated and thereby enforceable in law?

This is obviously something that needs to be investigated, along with how the FCA operates and also a full investigation into Barclays Partner Finance for allowing timeshare sales staff to broker loan agreements for timeshare sales which without the agreements would never be sold.

For all those who have purchased a timeshare with loan agreements know all too well, if it wasn’t for the swift granting of these loans by the sales staff selling the timeshare, they would never have been able to afford it. In most cases, the consumers even explained they couldn’t afford the loan, yet the sales staff lied to them about the repayments and how long the loan was for, many being told it would be for 2 years as the resale would clear the loan!

The one thing which differs from loan agreements for purchases of cars or other items is very simple, you are not required to make a decision at that moment, we all know that timeshare sales are “today and today” only. You are kept “hostage” for many hours until you succumb and sign the agreements.

Even without the usual checks!

Once the FCA recognises the fact that timeshare sales are conducted in a totally different manner to other types of sales, the sooner the practice of timeshare sales staff brokering the loans comes to an end.

It is now down to those who have been “sold” these loan agreements to start a campaign to have these agreements, the FCA and BPF investigated, putting an end to the misery that timeshare sales, BPF and now the FCA have perpetuated.

Having spoken with the moderator of the Azure Malta Action And Support Group, which was originally set up to bring Azure clients with BPF loans together, they have decided to allow any timeshare owner with a BPF loan to join the group. Hopefully bringing more people together and getting something done.

There are certain conditions to joining the group which is a closed group, if you are genuinely interested in joining then contact them via Facebook on this link:

https://www.facebook.com/groups/1152657598482168

Inside Timeshare is also calling for any members who purchased from Azure with a BPF loan agreement between January 2018 and the end of 2019. This follows some information published in the Financial Times which may put the validity of those loan agreements in doubt.

Please use our contact page for any comments or questions on this or any other article published and Inside Timeshare will get back to you.

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