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Overhaul of vacation club and timeshare industry on the cards

But it won’t happen overnight.

The inquiry into vacation ownership and the timeshare industry has proposed a far-reaching overhaul of the regulations governing the sector but it may take years before consumers reap the fruit of the recommendations.

The National Consumer Commission (NCC) launched an inquiry into the industry in May 2017, after a long and challenging struggle to resolve consumer disputes. Major points of contention are difficulties in cancelling contracts, which sometimes stretch into perpetuity, heavy penalties for termination and problems with the points system.

Some of the recommendations included in the inquiry’s report released on Thursday are:

  • That the minister of trade and industry prescribe certain information that intermediaries must provide to consumers before they can enter into a transaction with a club in terms of the Consumer Protection Act (CPA).
  • That all timeshare contracts be defined as fixed-term contracts, running for a fixed shorter period, subject to renewal by agreement between the club and the consumer.
  • That the rights given to consumers in Section 14 of the CPA should apply automatically in the event of a consumer cancelling. Section 14 of the CPA deals specifically with the expiry and renewal of fixed-term contracts.

National Consumer commissioner Ebrahim Mohamed said there is also an opportunity to consider a revision to the Property Time Sharing Control Act.

In this regard, an important recommendation is that a provision be prescribed by the minister for clubs to disclose an email address where notice of cancellation is deemed to be received once proof of remittance is provided.

Bone of contention

A requirement that consumers can only cancel contracts through registered mail has been a bone of contention, as it often meant that members couldn’t meet the five-day cooling off deadline allowed by the CPA.

The inquiry also recommended that a platform be created for the cashing-in, exchanging and re-selling of points.

The NCC accepted medium to long-term proposals that a comprehensive piece of legislation that centralises regulation of the timeshare industry in South Africa be passed and that a new regulator be created and tasked with enforcing compliance.

“The NCC anticipates that these recommendations will be implemented over a medium to long term, as well as in the short term, depending on the willingness of industry to engage in good faith with us and other stakeholders and regulators.”

Mohamed said the NCC has already discussed the recommendations with the minister of trade and industry and he has in principle agreed that there is a need to overhaul the regulatory framework to protect consumers.

Frustration, anger

The commissioner said the vacation ownership industry has been a source of frustration and anger for many consumers.

“It was most disturbing and sad to see elderly, vulnerable pensioners sob and plea with government for help and relief at these public hearings. The greatest discomfort I experienced though, was when a Free State-based consumer related a blow-by-blow account during her oral submission, of how she had planned to take her own life to escape her debt-stricken circumstances, which were occasioned by ‘a mistake’ she made when she signed up for a lifelong ‘timeshare trap’ as she called it.”

He stressed however that the intention has never been to punish the industry, but to rid it of its ills and to ensure that consumer transactions are fair and compliant with the law.

Consumer law attorney Trudie Broekmann says broadly speaking, it is a magnificent report – comprehensive, responsive to consumers, carefully researched and filled with generally insightful recommendations.

“The drafters of the report – several of whom are very senior members of the National Consumer Tribunal – have come out strongly in support of the interests of timeshare consumers. This is most encouraging for consumers who need the NCC and the tribunal to enforce their rights against recalcitrant timeshare companies.”

‘Taken aback’

Broekmann says she was “a bit taken aback” by the commissioner’s speech, which creates the impression that the onus lies with the Consumer Goods and Services Ombud or parliament or the timeshare industry to address the problems.

The report’s repeated recommendation is that the NCC “investigate … and enforce the provisions of the CPA where the consumer complaints have not been resolved”.

“The report creates a huge workload for the NCC, and we hope the department of trade and industry (dti) intends to equip the NCC with sufficient trained and expert manpower to allow them to achieve these tasks set out in the report,” Broekmann says.

Commenting on the way forward, chief director for policy and legislation at the dti, MacDonald Netshitenzhe, said the department would need to analyse the report and seek legal guidance with regard to the CPA and other legislation, competition and trademark issues.

The department would work on this internally in 2018 but the legislative process won’t start this year. Next year would be unpredictable because of the election, he added.

The Vacation Ownership Association of Southern Africa (VOASA) says it appreciates that a spotlight has been placed on the timeshare industry and remains committed to ensuring that 100% of timeshare owners and holiday club members are happy with the products and levels of service received.

“VOASA maintains its commitment to support effective legislation and robust regulatory oversight, including working with government and parliament to appropriately modernise South Africa’s prevailing legislative and regulatory framework and improving understanding of and insight into prevailing timeshare business models,” Alex Bosch, chief operating officer of VOASA said in a statement.

Vacation Hub International

Deputy commissioner Thezi Mabuza confirmed that the investigation into wholesale travel club Vacation Hub International is ongoing, but that it was a “different ball game altogether”. Various consumers have complained that Vacation Hub did not want to cancel contracts within the cooling off period, but the club said it would only refuse to cancel if the contractual terms and conditions had not been met.

Consumer Goods and Services ombud Magauta Mphahlele said in terms of the CPA a consumer can approach her office as an alternative to lodging a dispute with the NCC. Since January 2017, it has dealt with 427 vacation ownership or club-related complaints.

“We have been able to resolve 54% of those in favour of the consumer.”

Her office received 120 complaints against Vacation Hub International, but the club did not cooperate and was referred to the NCC.

Sixty-eight percent of complaints related to cancellation.

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So glad the industry is being investigated. My complaints are those expressed by many. I find the levies extremely high and find that one can stay at a resort cheaper than the levy price.

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