Timeshare owners often targets of exit-strategy scams

For the many years that I’ve worked for the Arkansas Real Estate Commission, a consumer group that has consistently been a target of unethical activity is timeshare owners who wish to sell their timeshares.

Many people who purchase timeshares eventually find that their lifestyles no longer match the vacation products they purchased several years prior. It’s sort of like the Corvette, purchased while a teenager, that subsequently has to be traded in for a minivan as family obligations overcome the need for speed. The difference is that there’s always a secondary market for the Corvette, while the resort industry has struggled to develop a successful secondary market for timeshares. This has opened the door of opportunity to unscrupulous individuals willing to take advantage of timeshare owners.

Many people own timeshare property and find it fits their vacationing needs quite well.

Our office has worked with the American Resort Developments Association for several years about the lack of a secondary market for timeshares and about companies conducting fraudulent timeshare exit activities. Timeshare owners who wish to sell their vacation property should visit the ARDA websites ( www.arda.org and www.ardaroc.org). ARDA has also published helpful information at www.responsibleexit.com for owners who wish to sell their timeshares.

In a recent press release titled “Timeshare Industry Fighting Back to End Exit Fraud,” ARDA issued the following statement:

“The timeshare industry, the American Resort Development Association and the ARDA Resort Owners’ Coalition have united to stop the misconduct of those deceiving timeshare owners into paying for illusory timeshare exit services through fraudulent means.”

The release also states that Castle Law Group has ceased business operations following federal lawsuits brought by developers against the company after the Tennessee Supreme Court disbarred attorney Judson Wheeler Phillips, founder of the Castle Law Group, on a myriad of charges relating to consumer-fraud complaints about timeshare exit activities. According to the ARDA, another matter prosecuted by Wyndham Destinations against American Consumer Credit, among the largest of timeshare exit companies, resulted in the ACC filing bankruptcy on Sept. 7, 2018.

“The constant pressure that our member companies, owners and federal and state agencies are putting on disreputable timeshare exit companies has again produced a positive result for the consumer,” said Robert Clements, ARDA’s vice president of regulatory affairs.

“A top priority for our industry and owners, and for law enforcement and other agencies, is to protect consumers from dishonest individuals or companies trying to take advantage of them,” said Ken McKelvey, chairman for ARDA-ROC. “These actions send a strong signal to criminals that fraud and deceptive activities will not be tolerated by our industry, and it tells consumers that we take the actions of these individuals very seriously.”

Arkansas encountered problems with vacation-property resale in the 1990s as advance-fee scams started popping up across the state. While the sales angles differed from one operator to the next, the basic business model started with obtaining a list of timeshare and resort-lot owners. Next, a call center was created by hiring inexperienced salespeople who did and said whatever their employer told them to in order to obtain the property owners’ credit-card information. The caller would then charge the owners a fee ranging from $300 to $700 to list their properties. Working together, Arkansas’ real estate commission and attorney general managed to shut down the advance-fee scams, in which the properties were only being listed for the advance fee but seldom sold. Less than 1 percent of properties listed by many of these companies were ever sold.

Fortunately, there has been some positive movement by the industry to address timeshare-resale issues.

Owners who wish to sell their timeshares

should begin by contacting the timeshare company to ask whether they have any in-house programs to assist owners in this regard. Legitimate timeshare companies do not want their property owners scammed by a less-than-scrupulous reseller.

The AREC office recently received a call from a timeshare owner who was on the verge of writing an $8,000 check to an outfit that promised to get her out of her timeshare, which she no longer used. Upon learning which company the timeshare was with, we found a contact for her. The timeshare representative informed her of an internal program by which they would assist owners by offering two options to dispose of the timeshare property. While neither option provided a return on the owner’s investment, they were viable opportunities by which the owner could dispose of the timeshare with little or no expense.

In another similar situation with a reputable timeshare company, we discovered that company also had an in-house program to assist owners in disposing of their timeshares.

As for the companies that claim to assist Arkansas timeshare owners to get rid of their timeshare property, the consumers should also ask sales representatives whether they have an Arkansas real estate license. The Arkansas Real Estate License Law requires people who perform activities in Arkansas involving the sale or transfer of timeshare properties to hold an Arkansas real estate license. If the representative does not hold a real estate license, the consumer should contact the AREC at 501-683-8010 and provide the details of the situation to a commission investigator.

While a real estate license does not guarantee that the person is offering the consumer a legitimate option, it does provide some protection for the consumer. Also, the AREC has the authority to impose a civil penalty up to $5,000 against any unlicensed person who illegally performs “unlicensed real estate activity” in Arkansas.

More information can be found at the Arkansas attorney general’s website, www.arkansasag.gov, by entering “timeshare” in the search field.

House to House is distributed by the Arkansas Realtors Association. For more information about homeownership in Arkansas, visit www.ArkansasRealtors.com.