The Timeshare Conspiracy

Timeshare Companies are well known for high-pressure sales tactics, for locking people into contracts they claim can never be cancelled, for deceptive sales practices, and for regularly failing to deliver on their promises. Lawsuits filed across the country, alleging fraud, deception, preying on the elderly, and violations of countless local, state and federal regulations, have done little to curb these abuses. While it may be true that some are content with their timeshare purchase, many feel taken advantage of and lied to and want to get out from under this financial albatross.

 

There are things you should know about what the timeshare companies are doing and what you can do to protect your familys financial well-being.

 

The following scenario may be familiar:

 

              You were invited to attend a brief presentation after being promised gifts and rewards to sit through a short sales seminar OR you were told that you were required to participate in an owner's update meeting that would take no more than one hour;

 

              You were subjected to hours of hard selling with multiple sales representatives pitching you and perhaps you were told that this was a once in a lifetime offer or this is not something we can do for everyone or whoever sold you your last timeshare screwed up or we can save you money or if you buy now, your fees will never go up;

 

              After hours of these tactics, exhausted, you finally gave in and bought a timeshare you were rushed through the signing process and you grew more dissatisfied with your purchase and wanted to get rid of it promises were made and not kept and it was much more expensive than you were told it would be; and,

 

              Worse yet, you may have sought the assistance of a timeshare exit company that told you they could get you out of your timeshare who probably guaranteed their fee if they did not.

 

By way of introduction, we are consumer protection attorneys and want to share our experience and opinions about this shameful industry. Moreover, it is our ardent desire to help and protect people who have been taken advantage of many timeshare owners fall squarely into this category. This article contains information that we believe is important and may be helpful if you or someone you know has a timeshare they no longer want.

It is hard to avoid concluding that timeshare companies (sometimes referred to as developers) operate with the express intention of deceiving, misleading, intimidating, and overwhelming consumers. Evidence for this is found in, among other places, the timeshare contract itself. These contracts are unusually long (some up to 100 pages) and complex (filled with legal language and mind-numbing small print), often signed while on vacation and always include a rescission clause providing only a few days to review the agreement and object (the most common giving only 5 days to back out). Most of these contracts contain in perpetuity clauses purporting to pass all fees and financial obligations from the original owner to their children after death. We have also never seen a timeshare contract that did not have an arbitration provision whereby the developer tries to make it more difficult to sue them in court.

 

What is taking place in the timeshare industry can best be described as a conspiracy of fraud on a massive scale. Hundreds of millions of dollars have been spent creating the illusion that a timeshare purchase is a real estate transaction. Documents mimicking a real estate transaction are prepared and incorporated into the timeshare contract creating distraction and confusion in the mind of the consumer. These documents referencing loans and financing can include Credit Applications, Truth in Leading Disclosure Statements, Escrow Instructions, Promissory Notes, Mortgages, Purchase and Sales Agreements, Deeds of Trust, Certificates of Title, Addendums, Powers of Attorney, Title Insurance, Transfer Forms, as well as others.

 

However, there is no real estate involved and no loan of money is ever made. Despite implying a transaction in land, exclusive equitable title an essential element of a mortgage is never transferred. By definition of law, all that is created by the timeshare contract is an intangible debt. What is being sold is little more than (1.) the right to pay unreasonable amounts to the developer that (2.) supposedly entitle the purchaser (often called the Member) to vacation at their leisure in other words, a right to enjoy a vacation on certain real property at a certain time, also called a timeshare interest. What many find out is that reservations are nearly impossible to secure, their personal concierge is never available, promised extras are not included, and fees guaranteed to remain low continually increase.

 

This charade is predicated on the developer both confounding the extension of credit with the actual lending of money (using documents that appear to represent a loan transaction) and masquerading as a secured party in a secured loan transaction. Again, no money every changes hands and, as such, there can be no secured party to a secured loan transaction because no loan is ever made. At its essence, the developer has only agreed to allow you to make use of their facilities so long as you continue to pay them. Nonetheless, the developer attempts to create something by simply stating the thing exists; they do this by sleight of hand we are giving you a loan, which you are going to immediately give back to us, so you can purchase your timeshare. But no money is ever exchanged or actually loaned to the consumer. It is from this fallacy that a million absurdities follow.

 

While some find a benefit to owning a timeshare too often this becomes an unbearable financial burden that people are desperate to get out of. According to a study by the University of Central Florida, 85% of timeshare owners later regret their purchase. As many as 50% want out because of the overwhelming financial burden. A quick search on the Internet shows that hundreds of timeshares are listed for sale for as little as a penny. However, the resale market for timeshares is virtually nonexistent. It is a scam. These timeshare companies are in the business of getting you to pay for something you neither want nor, often, can afford.

 

It all begins when the developer locks the unsuspecting consumer in a ballroom for hours on end and repeatedly says what a great deal they have for them and that it would be foolish to pass up this opportunity. The timeshare companies all too often then attempt to intimate and overwhelm the consumer by requiring lengthy contracts be signed and pages of paragraph be initialed without the benefit of review, telling the consumer that the timeshare will be theirs forever and passed down to their children after they are gone, and unleashing their dogs unless payment is promptly made. This may sound familiar.

 

An example of the extraordinary lengths these companies will go to defraud the consumer can be found in a recently coined term used by the industry to describe the timeshare purchase: 401(v). Most people are familiar with the retirement investment vehicle known as a 401(k). A 401(k) is a retirement savings plan that lets people save and invest a piece of their paycheck before taxes are taken out. 401(k) plans are named for the section of the tax code that governs them and became popular in the 1980's as a supplement to pensions.

 

Some developers have begun implying that a timeshare is an investment similar to a 401(k) by referring to it as a 401(v) as if the common, well-known, and widely-used retirement account can somehow legitimize a timeshare contract. By employing language that sounds familiar to the consumer, the intention is clearly to mislead them into believing that their purchase is similar to, if not the same as, a federally recognized, tax-protected, retirement investment account. This is just further evidence that the timeshare companies are engaged in deceptive practices and going to great lengths to hoodwink people in an effort to peddle their snake oil. ( Don't Make A Bad Investment In A '401(v)' - Forbes (June 2018) )

 

Technically, once in default, the debt is extinguished by operation of law. Under the express terms of the timeshare contract only a monetary obligation is created again, no loan of money is ever made (vacation rights are not an interest in land, and only real or personal property can be mortgaged or hypothecated). This is known in the law as a payment intangible. U.C.C. 9-102(a)(61). Nonetheless, developers continue making threats and claiming all sorts of harm will follow unless the account with the developer is brought current; they may take action further harming these individuals including making derogatory remarks to the credit reporting agencies, wrongfully issuing tax forms creating tax liabilities, and leaving people to pay enormous bills to credit card companies for fees charged by the timeshare company.

 

The timeshare company knows most people will never sue because of the cost and inconvenience involved. These companies are betting that people will be discouraged in the knowledge that if they do sue and win at trial, it is unlikely the judgment will exceed the cost in attorney fees, time, and hassle. Therefore, making it unlikely that a lawsuit is something that the developer will ever have to deal with. Moreover, the traditional approach of submitting a demand and hoping the developer responds has become little more than whistling in a graveyard; the timeshare company is adversary that refuses to engage and does not play by the rules. It is becoming a difficult but not impossible situation.

 

THE TIMESHARE EXIT-COMPANY

 

Frustrated and confused, some people end up turning to a timeshare exit-company that promises to get them out of their timeshare contract. While there may be a few of these groups that actually do what they say and place the consumers best interest first, all too often, these groups are no better than the developer themselves. It appears that many of these companies simply tell folks to stop making your payments knowing that the developer will eventually cancel the contract for nonpayment (advice you could get over a cup of coffee with someone knowledgeable about the timeshare conspiracy and for which you should not be paying thousands of dollars more about this explained below).

 

No claim here is made about the extent of services any specific group provides; I do not mean to paint all exit companies with this brush. Nonetheless, based on a survey of hundreds of individuals who have engaged a timeshare exit companies, several things becomes obvious. First, it has been repeatedly reported that these timeshare exit companies instruct people to stop paying the developer while often their written agreement states that the client (you) understand that you are responsible to continue to make all payments and that you are remain responsible for paying the mortgage. This strategy allows the timeshare exit company to provide a money back guarantee of your fees. They know that even a developer will cancel your contract at some point if you stop making your payments.

 

Many timeshare exit companies claim the fees charged are based on the amount still owed on the timeshare contract allowing them create the impression of saving you money.

 

For instance, a couple has paid $25,000 on a $125,000 timeshare contract, the amount still owed is $100,000. The timeshare exit company says, We charge 35% of the amount still owed on your timeshare contract. By paying us $35,000, you are saving $65,000.

 

People who either lack the knowledge or are desperate to get out of their timeshare contract tend to accept this rational as making complete sense. However, rarely will the services provided justify the fees being charged and amount still owed on the contract is illusory this money is not owed and it is a fraud to claim this is repayment of a loan when no loan was ever made, no money ever changed hands. Therefore, the timeshare exit company is not actually saving anyone any money. They are just using this as a slick way to explain why you should pay them a princely sum.

 

Many folks also report that the only service provided by these timeshare exit companies is the occasional checkup call to ask how things are going and maybe referring the matter to an attorney for handling. Some timeshare exit companies use attorneys to justify the fees they are charging claim that all attorney fees are included, imply that a portion of the fees charged by the exit-company are paid to the attorney, or claim that they have attorneys to deal with your situation. This is rarely the case and it could be illegal for a non-lawyer to charge attorney fees or represent that they are providing legal services. More likely, the timeshare exit company simply refers you to an attorney who will attempt to you get out of your timeshare contract.

 

Frequently, once the timeshare exit company has been paid, it is a struggle to receive a call back from anyone or to get any information about the status of your matter. If you do speak with someone, they will tell you how you are actually saving money because, once your timeshare is cancelled, you will not have to pay the developer any more money. The worst of them act just like the developer whose lies and misrepresentations are what created this situation in the first place. To protect yourself, it is always best to be a critical consumer and ask the tough questions. Trust in people and what they are saying can be the cause of many a heartache. It is never a bad idea to trust but verify - especially when dealing with an industry founded on false promises and designed to put you into a compromised financial position. It is criminal.

 

 

WHERE THINGS STAND as related to your timeshare matter. When we first became aware of the conspiracy of fraud taking place in the timeshare industry we were disgusted. It seemed that everyone involved in this enterprise was making people promises they never intended to keep and doing everything they could to defraud people of money most cannot afford to pay. We committed to do everything we could to help people obtain justice.

 

At the time, these developers were receiving a small number of cancellation requests; there were actually only a few who were trying to help individuals defrauded by these timeshare companies. It was relatively straightforward we would perform our due diligence, gather the facts, prepare and submit a demand package, and engage the developer in negotiations that typically resulted in a cancellation of the timeshare contract and often a refund of some portion of the money paid by our client. It was a traditional legal approach to the situation. Recently however, there has been an explosion of these timeshare exit companies who, often, are a group who last week were selling timeshares and this week decided they could make more money convincing people they could get them out of their timeshares. The result is that now these developers face hundreds of cancellation demands every week.

 

Developers have responded by undertaking a survival strategy and adopting a posture of denying, delaying, and ignoring claims asserted by consumers. With increasing frequency, developers simply deny claims out of hand, refuse to engage in meaningful settlement discussions, and once we have demonstrated an unwillingness to go away unilaterally and without formal notice cancel the contract (the process may include the developer filing for foreclosure if a deed is involved). It is a bitter pill to swallow.

 

As mentioned previously, some people with unwanted timeshares might elect for any number of reasons to just stop paying the developer. This is a legitimate response especially for those who can truly no longer afford to pay the escalating fees and costs associate with their timeshare. There is however a likely trajectory of events that will follow for those making that decision. First, the account would be suspended and placed in a default status any pending reservations would be cancelled and no further reservations would be accepted. From a legal standpoint, that is the end of it because the timeshare contract is a payment intangible and not a true real estate transaction once your right to make reservations has been terminated, the debt is cancelled by operation of law. As proof of the knowledge of these facts the developer never seeks any legal remedy (e.g., files a lawsuit for the moneys claimed owed under the timeshare contract) and most timeshare contracts contain provisions buried deep inside them giving the developer the right to cancel the contract for nonpayment and keep all monies paid as liquidated damages.

 

You can think of your Netflix account by way of analogy so long as you pay, you are allowed access to the service. The minute your payment fails, you find that you cannot watch your favorite program any longer. Netflix can, and would, never come after you claiming you owe them money for something you have not received i.e., the future benefit of their streaming services. The bargain is straightforward: if you pay, you are entitled to the service this is the same with a timeshare contract despite the timeshare industry going to great lengths to hide this fact. By a timeshare contract one (presumably) acquires the right to vacation (i.e., make reservations) when the account goes into default, the same applies, you lose the right to make reservations and the contract has come to an end.

 

The thing is the developer has a major investment in making you pay and pay and pay in fact, their while business model is predicated on it. They will not go quietly into the night. They will fight tooth and nail until the end. They will warn, threaten, cajole, demand, etc. that you pay them lest great harm befalls you. For those who simply elect to stop making payments, the timeshare companies have proven that they take steps to injure the consumer notwithstanding that these actions are wrongful and potentially criminal.

 

I have likened this to the Ford Pinto Exploding Fuel Tank. For years, Ford continued selling the Pinto despite knowing of a defect that caused the gas tank to explode creating a dangerous situation that killed many. Not until Ralph Nader and other legal professionals brought suit to hold Ford accountable was the vehicle recalled. It is the same thing with the timeshare companies. They will continue acting badly, if not illegally, until they are stopped. Until they are stopped, there are several things to be aware.

 

The timeshare companies regularly report derogatory comments to the credit bureaus, which have a negative impact on the consumers credit score. This is inappropriate because as in the case of your Netflix account when the contract goes into default, the contract is ended there is nothing to report to the credit bureaus. In furtherance of the fallacy that this is a real estate transaction, the developer may also initiate a foreclosure action. This is illusory and not appropriate but it is still common practice in the industry. Further, developers will also wrongfully issues tax forms that create a tax liability for the consumer despite there being no evidence the developer is authorized under the Code to file these forms, that a loan of money or credit was ever made to the consumer, or that the consumer had an interest in land that could be abandoned. This action harms the consumer who is now faced with a tax liability they should not be saddled with and created for writing off bad debt when no loan of money was ever made. (See, Instructions for Forms 1099-A and 1099-C (2019), https://www.irs.gov/instructions/i1099ac#idm14022115%208153472) Lastly, often times the developer will open a new credit card for the consumer to pay for a down payment, etc. and the consumer is then forced to make payments to the bank for something they never received.

 

It is a deplorable state of affairs. The Arizona State Attorney General filed suit several years ago against a major developer (https://www.azag.gov/press-release/attorney-general-brnovich-announces-800000-settlement-diamond-resorts) for fraud committed within its jurisdictional boundary. A $1,000,000,000 (one billion dollar) lawsuit was filed in January 2017 against Diamond Resorts International alleging elderly persons were targeted and induced to purchase vacation memberships in a same day sale without being advised as to the lack of a secondary market by intentional design. Memberships were accompanied by, at times, dramatically escalating maintenance fees (See Harding v. Diamond Resorts Holdings, LLC, USDC Case No. 2:17-cv-00248-RFB-VCF). This is only a couple examples of efforts to bring this practice to heel. However, developers remain actively peddling false promises and misleading information to people all over the country.

 

THERE IS A SOLUTION.

 

Our mission is to help people who have been taken advantage of; we want nothing more than to ensure people are educated about their situation and are making good decisions for themselves and their family. We have been protecting consumers for some time and believe there is no higher calling. If you have a situation that is causing you distress and you do not know who to trust, contact us. We will not ask you for money. You can contact us for free. If there is anything we can do to help you even if only to offer some advice and honestly answer your questions do not wait another minute. We are here to help.

 

 

Mr. Barlow is an attorney with extensive experience dealing with timeshare companies and timeshare exit companies. Unless specifically stated, this article expresses the opinion of the author only and may contain statements that do not apply in your specific case or to all developers.