Purchase of the timeshare membership
John and Sarah attended a presentation by a timeshare company selling timeshare holiday club memberships (“Timeshare Limited”), in August 2013. To fund the purchase of the membership, John and Sarah took out a loan of about $14,000 with a finance company which provides loans to people wanting to purchase memberships with Timeshare Limited.
A change in financial situation
In mid December 2013, John and Sarah told Timeshare Limited that their financial situation had changed and they wanted to cancel their membership. The nature of John and Sarah’s change in financial situation was that they now had family members living with them, resulting in increased demands on their income.
Timeshare Limited’s response
Timeshare Limited said its product disclosure statement and ‘members declaration of acknowledgement’ signed by John and Sarah stated that Timeshare Limited did not offer a ‘resale, buy back or redemption service’ meaning the membership could not be cancelled.
John and Sarah said that they asked Timeshare Limited’s salespeople at the sales presentation whether the membership could be cancelled and were told the membership could be cancelled, but that people rarely do that. The salespeople refuted this.
John and Sarah’s complained that they were misled into purchasing the membership, because they were told it could be cancelled. They also complained that the Product Disclosure Statement did not make it clear that membership could not be cancelled. John and Sarah wanted Timeshare Limited to cancel their membership and for Timeshare Limited to pay back the loan in full to the finance company, and a refund of the amounts they had already paid.
The Product Disclosure Statement included a ‘Cooling off Statement’ that said that membership could be terminated within 7 calendar days of the ‘acknowledgement date’ which was the day John and Sarah attended the presentation and purchased the membership. John and Sarah said they spoke with Timeshare Limited’s representative on the day of the presentation, and the Cooling Off Statement was mentioned to them, but not specifically pointed out. John and Sarah also confirmed that they first read the Product Disclosure Statement in December 2013 when they first contacted Timeshare Limited about cancelling their membership.
John and Sarah said that the Product Disclosure Statement should have clearly stated that membership could not be cancelled. We agreed that the Product Disclosure Statement and the Cooling Off Statement could be amended to make it explicitly clear that the membership cannot be cancelled outside the 7 day cooling off period. We thought the terms ‘redeem’ ‘buy back’ and ‘re-sale’ could be confusing concepts for customers especially in light of the product (membership credits) being intangible assets.
However, because John and Sarah did not read the Product Disclosure Statement until after the 7 day cooling off period, we found that they could not have been misled by the Product Disclosure Statement.
Alleged misrepresentation by salespeople
As there was a difference of opinion as to what may have been said at the presentation by the salespeople, we were unable to make a clear finding. We therefore had to apply the written contract. We found that John and Sarah had contributed to their own misfortune by not reading the Product Disclosure Statement and the Cooling Off Statement until December 2013.
Membership cannot be cancelled
Our overall view was that the Product Disclosure Statement and the members’ acknowledgement sufficiently stated that there will be no redemption, or buy back services which meant the membership could not be cancelled. Although John and Sarah wanted to cancel their membership because of a change of mind, this did not mean they could cancel the membership.
Options for John and Sarah
Part of the amount borrowed from the finance company was to cover insurance premium payments. We suggested that John and Sarah enquire with the insurance company whether they could submit a claim for cover to assist with their repayment obligations. John and Sarah said they had no intention of making an insurance claim.
We also suggested that John and Sarah enquire with the finance company about whether they could enter into a reduced payment arrangement because of a change in their financial situation. John and Sarah said they did not want to do this because they had not used the membership and no longer wanted it.
John and Sarah did not accept our and withdrew their complaint.
Lessons to be learned
In our experience of investigating complaints about timeshare memberships, cancellation is usually not permitted under the contract. Purchasing a timeshare membership is a significant investment and legal and financial advice should be sought before purchasing memberships.