Timeshare industry is on notice: CHOICE
Consumer group CHOICE has welcomed the Federal Court’s decision against timeshare provider Ultiqa for multiple breaches of financial services laws, including breaching the best interests duty, stating the industry is now on notice.
Timeshare salespeople were subject to financial advice laws meaning advisers selling timeshares needed to give advice that was in the best interest of their customers.
The court found that between October 2017 and March 2019, financial advisers acting as authorised representatives of Ultiqa advised consumers to invest in the Ultiqa Lifestyle Scheme timeshare despite such advice not being in the consumers’ best interests and being inappropriate to their circumstances.
Consumers reported the upfront cost of joining the scheme was between $10,000 to $25,000 with ongoing annual fees of up to $800. Most consumers who bought into the timeshare scheme took out a loan with a company related to Ultiqa to pay for their timeshare interest.
The court was told Ultiqa representatives pressured consumers, prevented them from obtaining external advice, misled consumers and offered inducements for them to sign up. A sales manual stated: “Do everything you can do to amuse, interest, excite, relax, humour, flatter and if necessary cajole your clients into staying”.
This was the first case of this kind brought by the Australian Securities and Investments Commission (ASIC).
CHOICE chief executive, Alan Kirkland, said: “These sorts of practices are rife across the timeshare industry, so this decision sends a huge warning to other timeshare salespeople and operators.
“The timeshare industry is now on notice. Its sales practices and contract terms need to change - otherwise operators should expect more court action.”
The court action followed a CHOICE complaint to the ASIC about Ultiqa back in 2017, which included evidence of a couple pressured into purchasing a timeshare contract with finance that could last until 2081, despite telling the operator they were “financially stretched”.
ASIC deputy chair, Karen Chester, said: “This is an important decision for consumers and ASIC’s first financial advice action against a timeshare provider. Timeshare schemes are complex financial products. They can be difficult to understand and compare. They involve significant long term financial commitments of tens of thousands of dollars, are often loan-financed, and can be difficult to exit.
“When sold alongside financial advice, it is fundamental – and legally required – that the advice is in the consumer’s best interest and appropriate to their circumstances.”
AUTHOR
Liam Cormican
Recommended for you
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
Estimates for the calendar year 2024 put the advice industry on track for a loss in adviser numbers as exits offset gains from new entrants.
Adviser Ratings shares five ways that financial advice changed in 2024 with an optimistic outlook for 2025, thanks to the Delivering Better Financial Outcomes legislation.
National advice firm Invest Blue has announced several acquisitions, including the purchase of an estate planning and wealth protection business Lambert Group.
