Following on from our previous article from Irene Parker about the Arizona Attorney General´s $800,000 settlement with Diamond, Irene has given her analysis of it.
One of the most contentious issues they have in the US is the perpetuity contract, this becomes part of the owner’s estate, thereby the children and then grand children etc, inherite the timeshare and with it the ongoing maintenance / management fees. Spain banned this concept in the timeshare Law 42/98, which came into force on 5 January 1999.
Any timeshare sold in Spanish territories since that date is limited to a maximum of 50 years, the reasoning behind this is quite clear. The powers that be believe that it is inherently unfair for the children of owners to be saddled with a contract and debt which they have not freely entered into.
There are other countries within Europe who have had this enshrined in their laws for years. Madeira, an Autonomous archipelago which is part of Portugal, situated in the Atlantic southwest of Portugal and 400 Km north of the Canary Islands, has never allowed perpetuity contracts. They have alway limited them to no more than 50 years, this was very popular with owners as they knew exactly when they would no longer be liable for the annual charges.
Malta, situated in the Mediterranean 80 Km south of Sicily, also limited the length of the contract to 30 years. Speaking with many of those owners who purchased in the 1980´s, they are now elderly, some getting to the stage where they no longer travel, Their contracts are now ending or have ended, they also know they are not leaving a continuing debt for their children.
It just remains to be seen if other countries in Europe follow suit, ending the controversy of perpetuity contracts. Now to Irene´s article.
Spain has ended perpetual contracts and now Arizona Attorney General Mark Brnovich is working on the front end to stop outrageous oral representations. Together we are changing the timeshare world.
An Analysis of the Arizona Attorney General’s Diamond Resorts $800,000 Settlement and One Reason Why It’s About Time
By Irene Parker
January 13, 2017
Irina Allen is a Diamond Resorts owner who was encouraged, over time, to buy 139,000 Diamond points. The sales agent encouraged her to buy such a large amount of points in order to be able to rent to cover her maintenance fees.
Diamond has now changed their rental policy. Owners can only rent to friends or family. Owners are prohibited from using sites like RedWeek, VRBO or EBay, commonly used to rent vacation weeks and points.
Timeshare contracts are a developer based contract, according to timeshare attorney Mike Finn of the Finn Law Group. “It basically states the timeshare company can change just about anything for any reason at any time.”
This new Diamond policy preventing renters from renting outside of friends and family may not sound significant in a new rule book, but for families, advised by sales agents to buy a high volume of points, it proves a disaster. Rising maintenance fees exacerbate the problem.
Owners told me earlier member guides stated travel agents could be used to rent points and the language in one signed contract states: “some or all Points can be rented outside of the immediate family.”
High Volume Diamond owners feel they are being targeted. If unable to pay maintenance fees without renting, they could be forced to surrender their points or foreclose. Surrenders are not guaranteed. When that happens, the timeshare company takes back the “inventory” and resells for full value.
Renting for the purpose of covering maintenance fees is still being proposed as a sales strategy, according to posts on our closed member based Diamond Resorts Facebook page. According to the post below, one Diamond timeshare sales agent did not get the memo:
https://www.facebook.com/groups/diamondresortsmembers/
“We attended a sales presentation at Kaanapali Beach Club and were encouraged to buy points to rent. The agent said his wife is renting out their units and made a profit last year.”
I contacted the owner who posted the above contract. She was able to provide:
The agent’s name, James Ziskend;
Date – January 5, 2017;
Location – Kaanapali Beach Club Maui
She posted the comment asking if anyone thought this was a good idea.
One owner was astounded the agent tried to sell them more points to rent AFTER the family had been issued a “Cease and Desist”. He said they could not launch a website, but renting on sites like RedWeek would be allowed. “Mega-renters” are high volume owners who do use websites to rent points for commercial purposes.
But back to Irina 
Irina is a professional person who has better things to do than go into business renting her vacation points. She bought her points to share with friends, family and clients. Irina has been devastated by a decision made concerning her account. Her account has been suspended for one year until August 2017.
While Irina’s account is suspended, she must continue to make monthly mortgage payments of $2,486 financed at 16% by Diamond and is responsible for the annual $29,000 maintenance fee payment. Diamond can rent out the points while the account is suspended.
Irina says she was given little warning so she also lost money on nonrefundable airline tickets. She was accused of renting on AirBnb, but claims she never had an AirBnb account. When she asked Diamond to provide proof she had an AirBnb account, Diamond told Irina they were not required to provide proof. Irina said she only opened the RedWeek account because the representative told her that was the best way to rent. She says she tried renting once on RedWeek, but never got paid.
Diamond offered the following response, but Irina says she did not rent out her points and others say they have signed contracts that state renting is allowed. We look forward to a constructive dialogue on the issue as it has had dramatic impact on several owners.
“We are investigating the facts and circumstances that led to the suspension of this account and will take corrective action, if warranted. However, the prohibition against renting points is stated explicitly in the Purchaser’s Understanding and Acknowledgement document that accompanies every sale, and both the timeshare program governing documents and THE Club® governing documents. It is a policy that we must enforce in order to preserve the quality of the vacation experience for all of our members.”
Diamond has announced a new “Clarity” program that the company says intends to go beyond the terms of the “Assurance of Discontinuance” issued by Arizona Attorney General Mark Brnovich. The AOD was issued in response to what owners feel have been deceptive business practices (see links below).
“Clarity” is meant to improve and strengthen existing quality assurance policies and procedures. The program is to be rolled out the end of January and will be nationwide. Stay tuned for an upcoming article about the new program.
http://insidetimeshare.com/opcs-europe-usa/#more-1518
Many use and enjoy their timeshares, but there are a multitude of complaints about timeshare. Finally, some owners complained to the right Attorney General. Any owner should agree, if the following provisions of AOD are used as a blueprint for timeshare industry wide, timeshare owners would feel less preyed upon.
As stated in the Arizona Attorney General press release:
The State has received hundreds of consumer complaints against Diamond Resorts. Consumers complained that Diamond used deceptive sales practices and made numerous oral misrepresentations and false statements during timeshare sales presentations. Some of the alleged misrepresentations are related to:
Annual increases in maintenance fees;
Membership resale and buy-back programs;
Timeshare membership resale market;
Ability to rent timeshare vacations; and
Discounts on other travel needs.
The Arizona Attorney General’s Office alleged that Diamond employee’s’ actions and statements violated the Arizona Consumer Fraud Act.
Under the settlement, which is subject to court approval, Diamond agreed to make a number of changes to its business practices that will benefit consumers, including requirements to make specific disclosures during timeshare sales presentations.
The relinquishment program will be available to qualifying consumers who no longer want their Diamond Resorts timeshares.
The 37 page AOD can be found linked at the end of the press release:
When a company finds themselves the target of a regulatory investigation, it has several options. Immediately a cost/benefit analysis is undertaken and the fastest and most straightforward option is full compliance. In an AG investigation, this can prevent unnecessary litigation expense and/or public exposure.
Choosing to enter into a settlement agreement known as an “Assurance of Discontinuance”, the company puts itself essentially under state supervision.
These assurances memorialize an agreement to ensure that unethical practice allegations such as ones made against it, do not occur again.
The AG also benefits by reducing time and costs of prosecution by establishing new parameters of ethical conduct. Should there be repeated violations of the “Assurance of Discontinuance” the AG would then have preserved its case, making full prosecution much more cost efficient for the state.
Page 16 section IV of the AOD mentions concerns I had addressed in my complaint and have written about in this and previous articles for TheStreet and Inside Timeshare:
IV B: Diamond shall advise all Vacation Counselors and Sales Managers that they may not:
Deviate from Diamond sales materials;
Make oral representations at the point of sale that are inconsistent with Diamond Purchase Documents;
Make oral representations referred to in subsection (c) of this paragraph:
Paragraph C includes these items from my complaint and from my articles written on behalf of owners that reached out to me to tell their story:
Paragraph C: Diamond, its officers, agents, servants, employees, successors, assigns, and those persons in active concert or participation with them are prohibited from making oral representations including:
The Consumer’s maintenance fees will be reduced by the purchase of additional Points, unless such representations are accurate;
Consumers may rent out Points for cash through online or print advertising to the general public unless such representations are true;
There is a secondary market for the sale of Points;
Consumers will be able to obtain a loan from a private lender to refinance a loan from Diamond at a lower interest rate.
Read the full agreement for the complete listing of terms and conditions.
I asked Mia Garcia, Arizona Attorney General’s Director of Media Relations to clarify who is eligible for the settlement. As I understand the AOD, the agreement applies to those who purchased in Arizona and to Arizona residents who purchased a Diamond timeshare anywhere. In an email response Ms. Garcia stated:
The settlement is not just for people who purchased from Diamond after 2011.
For all complaints filed between January 1, 2009 and January 23, 2017, the alleged conduct must have occurred prior to January 23, 2017.
For all complaints filed between January 23, 2017 and May 23, 2017, the alleged conduct must have occurred between January 1, 2011 and January 23, 2017.
In other words, if a consumer has already filed a complaint regarding conduct prior to 2011, they are part of the settlement. The 2011 restriction is only for complaints filed after January 23, 2017.
Ryan Anderson, Communications Sections Chief for the Arizona AG office provided the following FAQs concerning the Diamond settlement.
What’s next? Part III of a series of articles pertaining to Attorneys General and their help with Timeshare Reform.
As you can see from this article there are some very serious debates going on in the world of US timeshares. The voice of the consumer is growing ever louder, several Attorney Generals are taking notice of them and working to improve the situation, but there is still a long way to go. As Irene said in her opening paragraph, together we are changing the timeshare world.
Inside Timeshare is committed to bringing you the news about this industry, whether it be good or bad, without it you would not know what is happening. If you have any questions or comments on this or any other article published, please leave a comment. The debate is yours. Have a good weekend.
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