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Southern Investigative Reporting Foundation

Friday Review: News from Across the Ocean

Inside Timeshare once again publishes the Friday article from across the Great Lake (The Pond to our American Cousins). Today a new contributor, Laurie Sabbagh, with additional notes from our senior writer Irene Parker, who is doing a great job in rousing timeshare owners in the US to work together and improve the industry.

Firstly, we are getting more and more information on that outfit operating out of Tenerife, the Litigious Abogados family. The latest addition which we reported on 14 March Abel Garcia, was very interesting. As we said in the article, the website was registered on 5 January 2017, the name of the “law firm” was never heard of, yet the court document showing “Keith Baker” being sentenced, is dated 17 January 2017. Well we have never heard of a case going to court and being adjudicated with sentence being passed within 12 days. Wow, these lawyers are good!

We have also heard from another reader who had dealings with Stephen Fairclough and Meredith Pritchard Claims Consultancy Limited, another figure of just under £6000 has been paid, given the details of Jose Dorta of D&M Lawyers, yet no case or anything. This reader also suspects that the elusive Stephen Fairclough is back in Portugal.

So now on to our new contributor.

A Diamond Resort Member Does Her Timeshare Homework

Timeshare Members Instructing Other Members

Board

By Laurie Sabbagh  

Notes from Irene

March 17, 2017

Diamond Resorts member Laurie Sabbagh is also a member of our Diamond Resorts Advocacy Facebook Page. Our mission statement:

We seek to provide Diamond Resorts members a way to proactively address membership concerns; to advocate for timeshare reform; to obtain greater disclosure from the company; to advocate for a viable secondary market; and to educate prospective buyers.

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

Today Laurie educates prospective and current owners. Not many timeshare buyers comparison shop. Timeshare sales presentations are almost always same day sales. A timeshare sales agent named in the Colorado Attorney General’s investigation of Highlands Resorts explains why:

“According to Highlands Resorts” sales manager Steve Abrahamson, named in the lawsuit, “In the eighteen months he worked for Highlands Resorts, not a single consumer returned after their sales presentation to make a purchase. In his fifteen years in the timeshare industry, Abrahamson never saw a consumer purchase a timeshare after leaving a sales presentation.”

http://insidetimeshare.com/another-us-attorney-general-exposes-deceptive-tactics/

From Laurie:

I recently started reading the invaluable Inside Timeshare articles and web postings of timeshare advocate Irene Parker after joining the member sponsored Diamond Resorts Advocacy Facebook Group. In February I posted that I would soon stay at Diamond’s Los Abrigados resort in Sedona. Irene asked me to attend the “members update” to find out if sales agents were adhering to the Arizona “Assurance of Discontinuance” rules.

https://www.azag.gov/press-release/attorney-general-brnovich-announces-800000-settlement-diamond-resorts

After more than ten years of dodging the member updates, (i.e., sales pitches), I reluctantly accepted the invitation from the concierge to attend a 55 minute presentation.First, a little background on my Diamond “The CLUB” membership:

My membership started in 2006, when I purchased 8500 points in the Hawaii Collection when it was part of Sunterra. This vacation ownership interest (VOI) gave me a right of use equal to one week at either the Point at Poipu in http://Kauaior the Ka’anapali Beach Resort in Maui that I could reserve 13 months out, plus have access to resorts in the US and California Collections. In 2011 I received notice of a special assessment (SA) for a water intrusion problem at the Point. I scoured the internet to find out what was happening and learned that Sunterra knew about this massive liability when I purchased my vacation ownership, but its salespeople most likely weren’t informing prospective buyers about the problem prior to DRI’s impending purchase.

http://www.tstoday.com/members/magazine/issue123/7-poipu%20point.pdf

I was able to absorb the cost of the SA and considered myself lucky compared to owners who were on the hook for around $6,000 per deeded week for the water intrusion project – as many as 500 owners defaulted on their units because they either couldn’t or refused to pay the assessment. By reading Redweek and TUG I learned that management companies can change the terms of the Vacation Ownership Interest VOI membership agreement at any time, for practically any reason. I also read posts about high-pressure and questionable sales tactics being used to get consumers to buy into the various Collections  – some Hawaii Collection members were being told to get out of that collection by buying more points to transfer into the US Collection to avoid future SA’s, and vice versa. Reading about other people’s’ experiences was a wake-up call that it was not in my best interest to buy any more points.

Note from Irene:

I have received several complaints from people who attended sales presentations (one at Daytona Regency) told they should not have bought Hawaii Collection Points because Hawaii maintenance fees were going to increase dramatically or were encouraged to transfer Hawaii Points into the US Collection because Hawaii real estate is valuable, Hawaii Collection owners only can rent Points and only Hawaii members’ heirs can refuse inherited Points. Each transfer requires the purchase of more Points.   

Now to Laurie’s member update:

Two people

The promised 55-minute update turned out to be about three hours. The first salesperson, with whom I spent most of the time, was courteous and not high-pressure, although she did advise me to buy more Points to bring me into the Silver loyalty level which is 15000 Points. But to upgrade to Silver they were going to charge me over $8.00 a point, which would have cost more than $50,000! She also said the Hawaii Collection maintenance fees were more expensive and that I should join the US Collection. However, the second sales person I spoke with said with my small number of points, it costs only about $100 more per year.

Note from Irene:

According to SIRF Southern Investigative Reporting Foundation, Diamond points historically have sold for an average of $3 to $4 a point through 2014, according to data obtained from lawsuits. In a prior article, we reported Apollo plans to raise the price per point to $10 and then $12 per point.

http://sirf-online.org/2016/03/07/27464/

Back to Laurie’s sales presentation:

The sale’s agent also said that Apollo Global Management, the owners of DRI, would freeze that price for me for 18 months, and that the price was likely to rise soon.

Note from Irene:

Apollo Global Management founder, banker Leon Black, also founded Drexel Burnham Lambert of junk bond fame. Junk bonds did have some value, but a Diamond contract becomes worthless the moment it is signed should an owner need to sell, unless a friend or family member is willing to buy the Points.

Laurie:

I was also told that DRI members can use Points like cash for items such as airline travel, hotels, luxury items, and guided tours and adventures.  For example, Diamond Luxury Shopping enables Platinum and Gold members to apply Points towards products that are 30% off the best market price. But at a redemption point of $.30 per Point, this seems exorbitant to me.

Note from Irene:

I tried to use Points for an airline ticket. The Points we bought for $4 were worth $.07 for travel awards (Platinum $.10) so for $2,300 in equivalent maintenance fees dollars I could buy one domestic US flight. Customer Service told me this benefit is for convenience, not value.

Back to Laurie

Another example is that members can use 1500 points to purchase America the Beautiful – the US National Parks and Federal Recreational Lands Annual Pass.  My 8500 Points cost $1,973 this year, which includes maintenance fees, The CLUB fee, taxes, and mandatory membership in Interval International. That comes to about 23 cents a point.  For me, 1500 Points for the pass equates to $348, not including the $10 processing fee for my “Valued” level of The CLUB membership. I paid $80 for the same pass at a National Monument we just visited. Seniors over 62 pay $10.

At the end of the presentation a third person asked me some questions, including if I was treated courteously. I said yes, but also said I was not interested in buying any more Points with DRI. I declined the $100 Visa gift card, since that was not my reason for attending the update.

All said my elderly parents and I had a wonderful week at Los Abrigados. I was able to secure the historic Stone House, an 1800 square foot property with four separate entrances for only 6500 points. I almost always book weeks for 50 to 75 percent off, within the 59 day discount period, and have experienced good value for my points.  Every year I’ve been forced to vacation or lose my points, and I’ve taken about 18 weeks of vacation at DRI resorts since I bought my membership. If I had not purchased this VOI, I never would have gone to all the places that The CLUB membership has enabled me to visit. However, I advise other members to only use points for timeshare use, not the auxiliary products or non-resort vacation experiences DRI offers.

Thank you to Laurie for sharing her knowledge and experience. Email us at Inside Timeshare if you have a timeshare story you would like to share.

share

Thank you Laurie and Irene, once again Inside Timeshare would like to thank all those who contribute, either through writing articles or supplying information on possibly rogue companies. It is through your efforts that we can inform the timeshare world on what is going on.

On another note Canarian Legal Alliance has been nominated for the Canary Awards which recognises individuals and businesses that make a difference on the Canary Islands.

Canarian Legal Alliance has been nominated in the Real Gran Canaria category for their outstanding services to timeshare consumers and their efforts in the changing of consumer law.

In the Business Person of the Year category is Csilla Nazali, the operational manager of CLA for her outstanding work with all the clients.

Follow the link and vote for them, I’m sure they will appreciate it.

http://thecanaryawards.com/vote/voting-categories-page-1-of-2/

 

Is this Timeshare Proposal merely Monopoly Money?

Many owners in Europe are also having some of the same problems as those in the US, that of constant upgrading when on holiday. One of the main tactics that has been used is the the price per point is about to go up, buy now and save money.

Many have been told the reason for the increase, is that it is to bring them in line with the price in the US. Some have even been told that today’s price will be frozen for them until their next holiday, or even they are entitled to last years price only if they buy today. All timeshare has in the past been sold on the “stack and drop” model, it gave the impression of the purchaser getting a bargain.

It must be said that in Europe things are changing, although there are some who still use the old methods. Unfortunately, the lack of a resale market is one of the biggest concerns, especially when clients are told they can sell, usually for more than they paid. The following article explains the problems in the US, many readers in Europe may have come across this here as well.

Is this Timeshare Proposal merely Monopoly Money?

You decide based on facts

By Irene Parker – February 22, 2017

Monopoly money

From Wikipedia

Monopoly money is a type of play money used in the board game Monopoly. It is different from most currencies, including the American currency or British currency upon which it is based,

Diamond Resorts points, according to Diamond Resorts sales agents, should be looked upon as “currency” in that Diamond vacation points can be used for a variety of uses – just like real money.  But does a Diamond point equate real currency?

Diamond Resort owners rarely can even give their vacation points away should the need to sell arise. Seeking to sell our Diamond vacation points due to overly aggressive sales presentations, rising maintenance fees, and availability falling far short of what was promised, I contacted David Cortese of Magical Realty.

David Cortese is one of 64 Licensed Timeshare Resale Brokers who will buy and sell any major timeshare except Diamond Resorts non-deeded points, as the LTRBA members feel the  restrictions Diamond places on the use of secondary market points is so onerous, it renders the points worthless on resale.

My husband and I paid $3.06 per point for 6,000 Diamond points in 2012.

Imagine the dismay of a consumer presented with the following figures during a sales presentation – after they learn the points they purchased are worthless when they try to sell. Is the buyer informed of the lack of a secondary market? The prices below are easily the cost of a nice home. Who would buy a $400,000 home that became worthless on resale the moment the contract was signed?

What difference does the inflated price make to anyone but the selling agent and the company?

  • 2013 Price per point $5.06 to $7.50
  • 2014 Price per point $7.70 to $7.95
  • 2015 Price per point $8.11 to $8.20
  • 2016 Price per point $8.28 to $8.51

The following chart was also presented:

  • 8,500 points @ $72,420 ($8.52 per point)
  • 17,000 points @ $144,840
  • 25,500 points @ $217,260
  • 34,000 points @ $289,680
  • 42,500 points @ $362,100
  • 51,000 points @ $434,520 ($8.52 per point)

Our existing owner was told, if they buy today, and with approval from above, they can buy points today for $4.80.

What benefit is this to a consumer if the points have no secondary market?

In addition to our personal price history, Roddy Boyd of Southern Investigative Reporting Foundation included a price per point history in a price chart included in his article “Diamond Resorts and Its Perpetual Mortgage Machine”  showing the price per point trending down to the $2 to $4 point range until 2014. Diamond did review the article pre-publishing.

Diamond Resorts and Its Perpetual Mortgage Machine

The Chart obtained from owner lawsuits:

http://98zo02bh3v9r369dtffl01cj.wpengine.netdna-cdn.com/wp-content/uploads/2016/02/DRII_points_lawsuits.pdf

The Kroll Bond Rating Agency, as reported by National Mortgage News, offered the following warning, concerned with Diamond’s default rate:

dollar graph

http://www.nationalmortgagenews.com/news/secondary/newly-private-diamond-resorts-tests-securitization-market-1090005-1.html

Since the timeshare operator (Diamond Resorts) completing its previous offering, in November 2015, losses on the loans it makes to customers have been rising, primarily because more borrowers are seeking legal representation, according to KBRA. (Kroll Bond Rating Agency)

The ratings agency’s pre sale report attributes this to “a handful of [law] firms, targeting certain timeshare borrowers” and to borrowers’ use of “cease and desist” letters. The presale report does not elaborate, but TheStreet and The New York Times have reported that the company is battling two lawsuits over its business practices.

https://www.thestreet.com/story/13702895/1/diamond-resorts-international-s-second-quarter-earnings-reversal-is-worrisome.html

http://www.thestreet.com/story/13624491/1/is-apollo-returning-to-its-junk-roots-with-its-acquisition-of-diamond-resorts.html

These reportedly include pressuring owners to upgrade their membership in order to obtain benefits that do not materialize or are not as represented.

According to KBRA, the legal actions have dropped from their peak in the first half of 2016, but remain high compared with historical levels.

The ratings agency has the subordinate tranche of notes issued by a deal completed in July 2015 are under review for a possible downgrade.

Defaults reported by the deal, Diamond Resorts Owner Trust 2015-1, are zero, but only because the sponsor has been exercising its right to repurchase defaulted loans or substitute them with new loans. The company has the right to do this for up to 15% of the defaulted loans. However, it is not obliged to do so, and KBRA does not assume it will do so when it rates the bonds.

Diamond has also undergone a change in ownership. In September, the company was taken private by Apollo Global Management, which acquired it in a deal valued at $2.2 billion.

KBRA notes that, while other timeshare operators, including Wyndham, are experienced higher losses as the result of legal actions, “Diamond seems to be most affected.”

The presale report also notes that Diamond has made several changes designed to address the issue, including communicating with borrowers and attorneys on loans when possible and revising its sales and marketing training.

Bottom line: KBRA has increased its default expectation for the latest transaction considerably. Its base case is for gross losses of 17.9%-19.9%, compared with 13.05%-14.05% for the November 2015 transaction.

Roughly 99% of obligors are domestic and the weighted average FICO score is 732. However, the weighted average seasoning of seven months is approximately three months higher than in the previous transaction. The average loan balance remains high, at just over $25,000, which KBRA attributes to Diamond targeting obligors with higher FICO scores and incentivizing existing customers to upgrade into higher points programs.

Wells Fargo Bank will act as the “warm” back-up servicer in this transaction should the company experience deterioration in performance and be terminated as servicer.

At the very least, a timeshare buyer’s greatest advice:

group   Stay Informed and Seek Support

We seek to provide Diamond Resort members a way to proactively address membership concerns; to advocate for timeshare reform; to obtain greater disclosure from the company; to advocate for a viable secondary market; and to educate prospective buyers.

Buyers should also beware a Diamond point at $8.52 is worth only pennies used for travel awards.

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

Inside Timeshare would like to thank Irene for the article, it has certainly shed some light on these practises. As we said in the opening, Europe is changing the way timeshare and points are sold, it still has a long way to go, but it is heading in the right direction.

Your comments and stories are always welcome, just contact Inside Timeshare and we will get back to you.

 

Call for Change in the US Timeshare Industry

Continuing with our US timeshare theme, Irene Parker today highlights some of the problems that beset consumers in the USA, she asks the question who do consumers go to when they have a problem or complaint?

In this article she tells the story of an elderly couple Kathie and Wes Olds, who are Diamond Platinum members, 50,000 points, the concerns they raise about the constant upgrades and how they were encouraged to open a Diamond ResortsBarclaycard”. By using this card for purchases they could earn a 1.5% cashback award that could be used towards maintenance fees. As they found out later, it was not going to be that easy.

Irene also explains how the Olds, were told they could use their points towards the $8,200 a year maintenance fees at $0.50 a point, only problem is to be eligible they would need to purchase more points. As Irene put it previously the Olds were now part of the “Continuous Money Making Machine”.

Enjoy the article, it is certainly an eye opener.

FTC = Federal Trade Commission

FBI = Federal Bureau of Investigation

Is the FTC or FBI an avenue for Change for Diamond and other Timeshare Owners Devastated by Little or no Secondary Market?

By Irene Parker

Inside Timeshare

December 5, 2016

burglar

Timeshare today has been reduced to high pressure, often hours long sales presentations demanding prospects sign a perpetual contract today or lose incentives and perks that will be gone forever. The contract language often includes, “Heirs, successor trustees and personal representatives bound by the contract obligations.” Throw in the limited or nonexistent secondary market and you have a recipe for disaster.

Inside Timeshare previously told the story of the Saldana family. The family has since surrendered their Diamond contracts due to rising maintenance fees. Remaining is a $33,000 home equity loan. With legal help, they quite possibly could have been released from a timeshare loan. Timeshare buyers are often encouraged to obtain a home equity loan due to timeshare’s 14% to 18% loan interest rate. This conveniently lets the timeshare developer off the hook when the owner can no longer afford the rising fees.

http://insidetimeshare.com/irene-parker-write-barclay-card-usa/

The Saldana family was encouraged to open a Diamond ResortsBarclaycard” to become a Diamond platinum member so that they could charge their maintenance fees. A Diamond “point” historically costs $2 to $4 a point, but if used for maintenance fees, is worth only a few pennies on the dollar. They declined.

The Olds Family did open a Barclaycard.

Kathie and Wes Olds, ages 68 and 69, acquired enough Diamond points to become Platinum members. Like the Saldana family, the maintenance fees have become cost prohibitive. The Olds family own 50,000 Diamond points.

At their last Diamond “Owner’s Update” at Mystic Dunes in Orlando, Wes and Kathie expressed their concern over rising maintenance fees. The sales agent said they were in luck. Apollo Global Management, the private equity firm that purchased Diamond in a $2.2 billion buyout this past September, said effective February 2017 owners could “cash in” their points for $.50 a point and use them to pay maintenance fees, but they would need to buy another 10,000 points for $37,000. The sales agent suggested a home equity loan. Remember, we said points historically have sold for $2 to $4 a point.

Keep Reading

Shawbrook Bank Announce Irregularities in Timeshare Loans, Similar Activities in the USA.

For many people their Timeshare or Holiday Ownership was paid for on Finance, these loans were usually arranged on the day of signing the contract by the sales staff. One of these lenders is a bank called Shawbrook Bank, with their head office located in Brentwood Essex. The bank was founded in 2011 and according to their web site works closely with the holiday ownership industry to provide finance for their customers.

 

Unfortunately it was announced recently that the bank had set aside around £9 million to cover any defaults in these loans. This has come about due to the discovery of irregularities in the issuing of these loans.

shawbrook

Shawbrook Bank has admitted that it did not do its due diligence when approving the finance for holiday ownership products. One of its biggest partners is Diamond Resorts, whose aggressive style of selling has resulted in many people being over stretched financially, then being lumbered with a product that they find is unworkable. They are also stuck with management fees that are continually rising, also being unable to get out of their contracts.

 

http://www.telegraph.co.uk/business/2016/06/28/shawbrook-banks-shares-plunge-on-9m-hit-from-dodgy-lending/

http://www.thisismoney.co.uk/money/markets/article-3663651/Shares-Shawbrook-drop-challenger-bank-reveals-loan-irregularities-cost-9m-finance-chief-quits.html

 

What did Shawbrook miss on its due diligence?

 

Quite simple, finance agreements made out by sales staff on the day of the sale have not had the usual credit checks made. Normally when a loan is applied for there are several checks that are made, we all know this as at some point we have had them. Firstly, does the applicant earn enough to qualify for the loan. Secondly, can the applicant actually afford the repayments, after other payments are taken into consideration, i.e. mortgage, living expenses etc. Lastly does the applicant have a good credit history, in other words have they defaulted on any other finance, be it loans or credit cards, or have they had county court judgements made against them

 

All these are the usual checks, being unable to fulfil any of these criteria would normally prevent the loan from going through.

 

Another aspect is how the applications are filled out, Many people spoken to over the years have said that the application had been filled out by the staff. It later transpired that the purpose of the loan had been made out as “home improvements” nothing to do with the purchase of holiday ownership. In some cases, even the income has been falsified. Unfortunately, for the applicant this could lead them to the possibility of criminal charges, after all they have signed the form.

edwincoe

This is not the first time a bank has hit the news in relation to holiday ownership, Barclays Partner Finance has been the subject to action in the High Court on this matter. Edwin Coe LLP, represented many clients of Resort Properties, who had been sold “investment packs” which were then financed by Barclays Partner Finance. On 16 August 2015, Edwin Coe LLP announced that the High Court had decided in favour of the consumer.

http://www.edwincoe.com/our-expertise/group-action-litigation/resort-properties-barclays-partner-finance/

http://www.edwincoe.com/high-court-decides-in-favour-of-the-consumer/

 

Many of these loans did not have the usual credit checks made, in fact Inside Timeshare is aware of an elderly couple who had been given one of these loans. They had been talked into one of the Resort Properties / Silverpointinvestment packs”, at the time he was 8o years old his wife 76, the loan was for £30,000, yet both are on pensions. When Inside Timeshare spoke with them, the question asked was, had you gone to your bank, do you think they would have provided the loan? Well we all know what the answer to that is. They are now taking legal action.

barclays

Unfortunately this is not just the case for Europe, in the United States the same controversy exists.

 

Roddy Boyd of the Southern Investigative Reporting Foundation has been highlighting this, on 27 April 2016, he published an article on a Credit Union which has been supplying loans for Diamond Resorts clients. Quorum Federal Credit Union has been in operation for 82 years, as with all credit unions they are member based.

quorum

http://sirf-online.org/2016/04/27/the-enabler-and-the-lifeline-diamond-resorts-and-quorum-fcu/

 

Quorum, has been supplying loans for the holiday ownership industry for years, Diamond Resorts are their largest portfolio. Diamond tend to send the riskier applicants to the credit union, these are those in the lower credit ratings, what the Americans call “subprime”. In other words the banks would not touch them with the proverbial barge pole.

 

According to Roddy Boyd the deal provided around $40 million in loans for Diamond and in return these borrowers became members of Quorum. Sounds like a win win for both, (not the consumer).

 

At least Shawbrook Bank have admitted that it has seen a problem in this area, setting aside a substantial amount to cover any future problems. In the end a loan for a holiday product which will on average be around £10,000 or more, is a huge commitment, not one that should be signed and approved on the day. Especially by the sales staff who have a vested interest in getting the “deal”.

 

Inside Timeshare would like to thank Irene Parker of the The Street for supplying the link to Roddy Boyd´s article. Do read it in full yourself as we have only just touched the surface, also read the following link, again it makes interesting reading.

 

http://sirf-online.org/2016/03/07/27464/

 

If you have any questions relating to this article or any others published contact Inside Timeshare and we will try to find the answer for you.