If you own a timeshare or, God forbid, are considering buying one, I have one word of advice that has made the timeshare industry mad at me following my April 2021 article quoting 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.
In that article, replying to my question, “What do you risk by not paying the timeshare maintenance fee or loan?” Olsen stated, “I can’t recall a single instance where a client was ever sued. Timeshare companies never sue.”
When that story ran, I got a call from a woman claiming to be in management with a timeshare developer in Las Vegas. It was a warning: “Mr. Beaver, we don’t appreciate what you are revealing about how we deal with people who don’t pay. Be careful.”
In the time since that article was published, timeshare-collections practices have become much more predatory.
So, what is my one word of advice?
Don’t ever sign one of these hideous, noncancelable contracts that may require you to make maintenance payments forever for something that you may never be able to use the way it was sold to you or get out of even if you’re sick and unable to travel.
Reminds Me of Racketeering
The timeshare monstrosity has torn families apart, driven people into poverty and led to bankruptcies and suicides. And if anyone thinks that I am exaggerating, just ask St. Petersburg, Fla.-based attorney Mike Finn of the Finn Law Group, a consumer advocacy firm that focuses a considerable portion of its practice on assisting timeshare owners.
Mike’s description of the way the timeshare industry deals with its customers today reminds me of racketeering.
And if you bought one in the islands, hang on to your life preserver!
Buy in the Islands and Get Sued: War Against Exit Companies Begins
“Island destinations have been a popular venue to stick timeshare buyers with contracts that come with a little extra,” Finn notes, adding that about 15 years ago, smaller island resorts began to sue people who put the purchase on their credit card but then canceled in a timely manner and those who stopped making their yearly maintenance payments.
“The developers filed suits in island courts,” Finn says, “obtained default judgments, transferred them to where the people resided and hired collection agencies in their home communities.
“But the real declaration of war on timeshare owners and exit companies began when law firms began assisting people attempting to terminate their timeshare purchase contract after their requests to the developers were ignored.
“In my judgment, the developers were attempting to cause a disruption between those timeshare holders and the third-party exit company. It should be noted that the timeshare industry has always had the ability to pursue court action against all timeshare owners, since every one of them signed a promissory note, and many signed mortgage notes.
“However, this was a weapon aimed more at anyone trying to provide assistance to owners rather than against these owners themselves.
“Since COVID, the timeshare industry has been pursuing owners, presumably because their cash flow has been impacted due to the pandemic.
“The most important takeaway is that no one is safe!”
The Underlying Problem: You Are a Cash Cow
So, why don’t the developers just let people out of the contract – especially those who can’t travel, are ill or just don’t want the timeshare anymore? Having nothing to lose, why not take it back, resell it and keep all the money paid thus far?
“Because it is a cash cow!” Finn says. “Unlike a car you buy that you can sell later, you bought a timeshare and have no control over it. The developer thinks, ‘I will get maintenance fees from you – currently $2,000 yearly on average – and make it very hard for you to get rid of it. I may or may not take it back. I have total control over you. And then I may sue your pants off, even though I am going to sell it to someone else and get my purchase price back.’ There is no other product in the world that can do this to you. None!”
You Are Buying Nothing!
At one time, when you bought a timeshare, you actually got a week in that timeshare – you owned that week.
Finn points out that about 18 years ago, the business plan for timeshares changed so that buyers bought points that were usable at any participating resort. “Sounds great, right? Gives you flexibility. Your contract required using their reservation system, but they did not tell the buyers they were competing, not only with other points owners, but with the public.
“So, when you buy a timeshare, you are not buying anything. You are buying the right to attempt to make a reservation. The resort could easily be totally booked by members of the public using the same reservation system.”
So buyers were saying, “I have to book one year out? I don’t know what I am doing in a year. This is plain crazy!”
“You are not told any of this,” Finn goes on. “So, you buy the timeshare, try to book something and can’t, get frustrated and want out. This is the reason so many people have flocked to exit companies.”
If You Still Want to Buy a Timeshare
Timeshare and Resort Developer Accountability, Inc. (TARDA) is a 501(c)(4) nonprofit. Irene Parker of St. Augustine, Fla., founded TARDA in 2019 along with a team of timeshare members and owners who felt there was no true consumer voice at the legislative level.
TARDA volunteers respond to existing and new timeshare members who don’t know what to do about a dispute or who are seeking release from an unwanted timeshare.
Irene lists what you need to know if you’re considering a timeshare or would like to get out of your existing contract.
A few do’s:
- Do buy a timeshare from the resale market instead of directly from the developer – it will save you a fortune. For example, a $20,000 Hilton Grand Vacations timeshare on the resale market is priced at around $1,500 to $2,000. Restrictions that may apply are typically outweighed by the savings.
- Do your timeshare math. Take the purchase price, including finance charges and yearly maintenance fees, and amortize the cost over your expected lifetime. Spending $30,000 for a vacation plan at age 70, as opposed to at age 45, may not be prudent. Rarely do the elderly realize they will not live long enough to benefit from the timeshare. Additionally, heirs must be notified that there is no obligation to inherit the timeshare and that they can decline to accept the timeshare by disavowing the inheritance.
A few don’ts:
- Don’t buy the same day as the presentation. Timeshare sales agents rely on emotion, and often guilt, to force a decision. “Do you love your wife and kids? Well, then, don’t you feel you owe them quality time? Think of the joy vacations bring, and that’s what I am offering you.”
- Don’t rely on statements made by timeshare agents or anyone connected to the sale of a timeshare. When your complaint begins with, “The sales agent said…” you will be directed to the fine print in the contract that states, “I did not rely on oral representations to make my purchase.”
- The final step in closing a timeshare sale is the signing session. Since 2017, these have routinely been recorded. It is critical to state any questions that you may have on the record. If your questions are not raised on the recording, your silence will later be used against you if you complain. “Why didn’t you raise these issues when we recorded the closing?” you will be asked. Of course, a response is that you likely did not know what to ask, as timeshare ownership was new to you.
Here are some steps you can take if you decide you want to exit your timeshare:
- Contact your resort to determine if it will be of help.
- Check social media sites to see how your resort has responded to others in your situation.
- Be leery of signing up with an exit company – many are scams – and don’t rely on testimonials, because they can be fabricated.
If the firm guarantees an exit and wants money upfront, run! No one can guarantee an exit except the other party to a contract, which is the developer. Exit companies are not regulated or licensed by the government and rarely have escrow accounts for the money you pay them. There are a few exit companies who operate legitimately, but they are few and far between.
Need more help to get out of a timeshare? You can visit TARDA’s website for information, or speak with an attorney who has timeshare experience – that is critical.
A timeshare can be a great benefit for a family until it becomes a financial burden with no way out.
After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law." Through his column he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."
2024 Election: Tax Plans of the Presidential Candidates
Tax Letter Joy Taylor reviews the tax plans of the 2024 election candidates. With a raft of tax provisions due to expire in 2025, the tax stakes couldn't be higher.
By Joy Taylor Published
Tennis Channel To Serve Up New Streaming Service Next Year
The Tennis Channel's direct-to-consumer streaming service will include live and on-demand matches as well as original programming.
By Joey Solitro Published
Year-End Tax Planning for a Financially Healthier Retirement
Getting your tax ducks in a row for the end of the year can decrease your tax liability and make the most of your income, now and in retirement.
By Ryan Marston, Investment Adviser Representative Published
Where to Start Financially After a Life-Changing Diagnosis
Dealing with an illness, yours or your child’s or that of another loved one, is hard enough without adding financial duress. Here are some considerations and suggestions for covering expenses.
By Stephen B. Dunbar III, JD, CLU Published
Six Ways to Prepare for Widowhood and Protect the Surviving Spouse
No none wants to have to plan for losing their spouse, but having plans in place and knowing what to do when the time comes can alleviate at least some of the stress.
By Tyler Hill, Investment Adviser Representative Published
Creating a Blended Family? Three Key Steps to Consider
Blended families can make your finances and estate extra complicated, but you can head off some of those issues with careful planning.
By Adam Frank Published
Do You Need Disability Insurance?
If you work for a living, the answer is yes, so don’t overlook protecting your biggest asset. Open enrollment season is the perfect time to assess your options.
By Frank J. Legan Published
Retirement Planning in a Time of Inflation and High Interest Rates
Today’s challenges make retirement planning even more complicated than usual, but it’s not all doom and gloom.
By Ken Moraif, MBA, CFP®, CRPC® Published
Not Confident About Retirement Despite Financial Success?
You’re not alone. Uncertainty related to interest rates, government debt, long-term care and market volatility is making everyone uneasy. What can you do about it?
By Barry H. Spencer, Registered Investment Adviser Published
Risk vs Reward: Understanding This Intricate Investing Dance
The stock market can be unpredictable and complex, so having a good grasp on how to mitigate risk is essential.
By Kerim Derhalli Published