• Fri. Jun 24th, 2022

Federal Court Finds Timeshare Company Failed Consumers

ByLinda W. Smith

May 18, 2022

The Federal Court said timeshare company Ultiqa Lifestyle Promotions Ltd violated financial services laws by failing to ensure that financial advice given to consumers was in the best interests of consumers.

Between October 2017 and March 2019, financial advisors acting as authorized representatives of Ultiqa advised consumers to invest in the Ultiqa Lifestyle Scheme, a timeshare program, although such advice was not in the best interest of consumers and are not suited to their situation.

Consumers reported that the initial cost of joining the program was between $10,000 and $25,000 with ongoing annual fees of up to $800. Most consumers who have entered the timeshare program have taken out a loan from an Ultiqa-related company to pay their timeshare interest.

ASIC Vice President Karen Chester said, “This is an important decision for consumers and ASIC’s first financial advisory action against a timeshare provider. Timeshare programs are complex financial products. They can be difficult to understand and compare. They involve large long-term financial commitments of tens of thousands of dollars, are often funded by loans, and can be difficult to exit. When sold with financial advice, it is fundamental – and legally required – that the advice is in the best interest of the consumer and appropriate to his situation.

In rendering her decision, Justice Downes found that Ultiqa’s authorized representatives prioritized sales objectives and targets over the best interests of their clients, saying: “That they gave such priority also manifested by Authorized Representatives engaging in tactics to pressure consumers into signing up for the presentation, including (in one instance) preventing the consumer from seeking outside advice, (in two instances) inducing misleading consumers by indicating that the interest in the program was not a timeshare scheme, generally not giving consumers sufficient privacy and time to discuss and debate the proposed acquisition of interests in the Scheme, and offering incentives to consumers to sign up for the presentation. That they were required by Ultiqa to give such priority is apparent from the content of the documentation provided. Urned by Ultiqa […] The objective of the advice was to make a sale and not to act in the interest of the consumer.

Judge Downes’ ruling also cited a sales manual provided to authorized Ultiqa representatives that said, “Once your customer is on the sales deck, they realize that this is a sale and what goes through his head is “How can we get out of here?”, and, if you give them the chance, they will. DON’T GIVE THEM THE CHANCE! Do whatever you can to amuse, interest, excite, relax, please, flatter and, if necessary, entice your customers to stay.

Vice President Chester said, “Ultiqa prioritized sales over proper advice and ultimately the best interests of consumers. The high-pressure sales tactics used, and even documented in their sales manuals, encouraged sales agents to “encourage” consumers to invest in a timeshare program that many could not afford. Despite paying tens of thousands of dollars in upfront and ongoing fees, many have been unable to even book a vacation at their timeshare due to lack of availability, which means they don’t have one. not got their money’s worth.

The Court said Ultiqa did not:

  • act effectively, honestly and fairly;
  • provide relevant training to its authorized representatives;
  • appropriately monitor and supervise its authorized representatives; and
  • have documented policies and procedures in place to support the counseling process

Ultiqa ceased promoting the sale of interests in the Ultiqa Lifestyle Scheme on January 28, 2020 and went into voluntary membership liquidation on April 30, 2021. The Scheme remains active and Ultiqa currently holds an AFS license, which allows consumers to access dispute resolution services through the Australian Financial Complaints Authority.

The case will return to court for a case management hearing on May 27, 2022.

Background
ASIC filed a civil suit against Ultiqa for failing to ensure that financial advice to consumers to purchase timeshare products was in the best interests of consumers on November 3, 2021 (21-288MR).

Timeshare programs are managed investment programs and financial products that typically involve property in the form of vacation accommodations. These are complex products that typically involve high upfront fees and ongoing annual costs.

Timeshare financial advisors typically sell timeshare “memberships” by providing personal product advice to consumers and may use persuasive sales tactics. In many cases, consumers do not recognize that they have received financial advice, which poses a significant risk because consumers are unaware of the financial commitment of the product and do not know if it is right for them. ASIC Timeshare Report 642: Consumer experiences showed a high level of dissatisfaction among timeshare participants.

Report 642 examined timeshare consumer experiences following consumer research conducted in 2019.

He also indicated that many research participants were dissatisfied with their timeshare memberships and that timeshare memberships carry significant risks, including:

  • the long-term nature of the contracts, which generally range from 20 to 99 years
  • high initial membership costs which average $23,000
  • ongoing annual membership fees which average $800
  • the fact that many consumers often need to borrow to buy a subscription, with 48% of consumers having taken out a loan to buy a subscription
  • the high cost of borrowing to purchase a membership, with an average borrowing cost of $19,699 and an average interest rate of 13.51%
  • the fact that timeshare memberships are often difficult to leave.

The scheme is one of approximately 15 registered timeshare schemes currently operating in Australia. Until January 2020, it was one of five schemes to issue interest to new members. Data provided to ASIC by the Australian Timeshare and Holiday Ownership Council indicated that there are currently around 180,000 timeshare members in Australia.

ASIC previously fined timeshare lender Ultiqa Lifestyle for responsible loan failures in 2018 (18-253MR) and raised concerns about Ultiqa Lifestyle’s disclosure and sales practices in 2016 (MR16-418).

Originally Posted by ASIC


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