The timeshare wars rage on. The latest salvo comes courtesy of Washington state’s attorney general, who filed a lawsuit last week accusing the industry’s biggest timeshare exit company of widespread fraud.
The “exit” companies — many of which do a steady business in Florida — claim to help free consumers from unwanted timeshares. Timeshare contracts often require owners to pay fees and other costs until they die. The exit companies tell clients they can get the timeshare resorts to take back the property, releasing them from the contract.
The companies often charge $3,000 to $8,000 for the service and nearly all of them tout an ironclad guarantee. If they don’t free clients from their timeshare contract, they will give the money back. At least, that’s the promise.
The attorney general found that Washington-based Timeshare Exit Team “unfairly and deceptively contracted” to resolve about 38,000 timeshare cases since 2012. Of those, 17,000 are still pending — 8,000 for at least two years, and 4,600 for at least three years.
Even some of the “successful” exits are in dispute. The lawsuit describes how the company and its vendors transfer timeshare deeds to dubious third parties, creating the illusion that the owner is off the hook. In other cases, they send a “notice of resignation” to the resort stating the owner wants to relinquish the timeshare. The document, though, has no legal standing unless the resort consents to take the timeshare back, the lawsuit said.
Timeshare Exit Team has “congratulated many customers on a ‘successful’ exit, only for the customer to find out months or years later that they still own their timeshares and are now behind on their payments,” attorney general Robert Ferguson wrote in the lawsuit.
Consumers also complained that the company wouldn’t honor its money-back guarantee. The company often refused to grant a refund to clients who wound up in foreclosure, a worst-case scenario. The company classified foreclosure as a successful outcome, which is a little like surgeons saying they are satisfied with patient deaths.
In other cases, clients grew frustrated with waiting, called the timeshare company themselves and negotiated the end of their contracts. That’s one of the secrets of the business. Many of the services that exit companies perform, timeshare owners could do themselves. Timeshare Exit Team has no proprietary process or internal expertise, the lawsuit said, and outsources about 95 percent of its customers to third-party vendors.
The lawsuit describes how an internal company manual had a section titled “I could have just done this on my own. I want my money back.” The instructions advised customer service reps to refuse refunds based on foreclosures. It also instructed reps to tell clients: “They did NOT do it on their own. They signed a contract with us and we achieved an exit.”
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The company spends about $1 million a month — 25 percent of its revenue — on advertising to sign up new customers, the lawsuit stated. Some of the ads professed to get customers out of their contracts “safely, legally, forever,” promises the attorney general described as spurious.
“Virtually every step of this process — from advertising to the exit letter — is unfair, deceptive, and/or outright false,” according to the lawsuit, which asked for up to $2,000 in civil fines for each violation of the Consumer Protection Act.
Damning stuff, for sure. But hardly surprising. The “exit” industry has raised concerns for years, attracting lawsuits and thousands of consumer complaints.
Officials with Timeshare Exit Team, also known as Reed Hein & Associates, said they strongly disagree with the allegations and called some of them “flat-out factually incorrect.”
“We have complied with the (attorney general’s) inquiry from day one and will continue to do so until it’s clear to all involved that these accusations are entirely baseless,” the company said in a statement.
The attorney general’s lawsuit is a win for the timeshare resorts. They view the exit companies as a plague, dishonest rogues who mislead easily duped consumers. But the resorts aren’t angels in this fight. They have faced a barrage of complaints over the years. Timeshare owners describe predatory sales tactics and unkept promises. The exit companies wouldn’t exist if tens of thousands of timeshare owners didn’t feel trapped by longterm contracts they don’t want or can’t afford.
Case in point: Last year, dozens of readers contacted me after I wrote about an unsuccessful attempt to make it nearly impossible to hire an exit company in Florida. I figured most would have stories about unscrupulous exit companies. Instead, nearly all of the readers complained about their timeshare resorts, including how it was too hard to give their units back.
Many people like their timeshares. Others think the exit companies provide a valuable service. But the whole industry has a lot of work to do to improve its reputation.