National Consumer Commission head Ebrahim Mohamed File picture
National Consumer Commission head Ebrahim Mohamed File picture

A long-awaited report on the inquiry into the timeshare industry has recommended that all timeshare contracts, including the purchase of points and membership application agreements, be defined as fixed-term contracts in terms of the Consumer Protection Act.

The National Consumer Commission report recommended that the rights set out in the act for consumers regarding the cancellation of fixed-term contracts also automatically apply.

However, these recommended changes to the legislative regime will take a long time to finalise and in the meantime consumers will be at the mercy of the industry in terms of the cancellation of their existing contracts.

Any legislation would also not be retrospective, and it would therefore depend on the willingness of industry to change its practices with regard to existing contracts.

That would address the question of misrepresentation and the way consumers were lured through ‘fancy and glitzy’ presentations into signing contracts immediately.
Ebrahim Mohamed

There is widespread frustration and anger on the part of timeshare owners about “in perpetuity” contracts, which provide owners with no means to extricate themselves from them. The commission has received a flood of complaints about these contracts over many years, as well as during public hearings held by the inquiry panel throughout the country last year.

National Consumer Commission commissioner Ebrahim Mohamed said at a media briefing on Thursday that the major problem experienced by consumers was with the points system within the timeshare industry, and most of the recommendations of the report addressed these problems.

The report recommended that the regulatory framework for the timeshare industry be revised to provide consumers with protection. That would, among other things, require that intermediaries be compelled to provide consumers with certain prescribed information before contracts were concluded. That would address the question of misrepresentation and the way consumers were lured through “fancy and glitzy” presentations into signing contracts immediately, Mohamed said.

A co-ordinated, streamlined and simplified disclosure regime should also be provided through regulations under the Property Timeshare and Control Act. This would also compel the industry to disclose certain prescribed information to purchasers before the signature of contracts.

Provision should also be made for the cashing in, exchange and resale of points. Mohamed noted that existing entities performing this critical role lacked independence from the industry and there was an absence of known guidelines and methodology for the evaluation of points. A proposal has also been made that the administration of the Property Timeshare and Control Act be housed in a dedicated regulatory authority.

Other recommendations fell under the jurisdiction of the Competition Commission, the National Credit Regulator and the Companies and Intellectual Property Commission.

Mohamed anticipated that the recommendations would be implemented over the medium to long term. Short-term measures would depend "on the willingness of industry to engage in good faith with us and other stakeholders and regulators”.

Mohamed said he had accepted the recommendations made in the report and had held meetings with trade and industry minister Rob Davies about them. The minister had agreed in principle that an overhaul of the regulatory framework was needed to protect consumers.

ensorl@businesslive.co.za