Consumers trapped in lifetime contracts with holiday clubs that operate in tourist spots like Durban’s Umhlanga beachfront should be able to convert them to fixed-term contracts by taking the matter to consumer goods and services ombud. Picture: 123RF/LEON SWART
Consumers trapped in lifetime contracts with holiday clubs that operate in tourist spots like Durban’s Umhlanga beachfront should be able to convert them to fixed-term contracts by taking the matter to consumer goods and services ombud. Picture: 123RF/LEON SWART

The National Consumer Commission’s (NCC’s) inquiry into the timeshare and vacation ownership industry has recommended a review of the laws that apply to these contracts and the appointment of a regulator to deal with the industry.

But at the release of its much-anticipated report on its inquiry into the industry in Pretoria, MacDonald Netshitenzhe, the chief director of policy at the department of trade and industry (DTI), said law reform was not likely to happen next year with it being an election year.

In the meantime, NCC commissioner Ebrahim Mohamed encouraged consumers to lodge complaints with the consumer goods and services ombud (CGSO), who would assess the extent to which industry was “willing to allow consumers to exit contracts without penalty, in particular, the nefarious in-perpetuity contracts”.

The NCC is a statutory regulator whereas the CGSO is not, although membership of the ombud scheme is compulsory for any supplier of goods or services, as defined by the Consumer Protection Act (CPA).

CGSO ombud Magauta Mphahlele said that between January and December of this year, the CGSO had 427 timeshare-related complaints, 54% of which were resolved in favour of the consumer.

The ombud offers a free service to consumers, trying to help them resolve their complaints with suppliers by means of alternative dispute resolution.

Where the ombud is unable to resolve the matter, it is referred to the NCC to investigate. If the NCC is of the view that the supplier has breached the law, it can bring a case against the supplier to the National Consumer Tribunal (NCT). Rulings issued by the NCT carry the weight of a high court judgment.

“Where we find there was a contravention of the CPA we’ll push for cancellation, but the ombud doesn’t have decision-making powers,” Mphahlele said. “If a supplier refuses to cancel, the matter will have to escalated to the commission for a formal investigation and possible referral to the tribunal.”

The major problems that consumers experience are with the points system and not with conventional timeshare
NCC commissioner Ebrahim Mohamed

In September 2015, the NCT threw out a case brought by the NCC against Flexi Club and other holiday clubs in the Club Leisure Group because the commission’s papers were not filed in accordance with the tribunal’s new rules. Among other things, the NCC had failed to include an investigation report. The NCC admitted at the time that it had not compiled an investigation report, because when it started and concluded its investigation there was no requirement to do so.

'Begged for relief'

The DTI’s lack of urgency in dealing with the inquiry’s recommendations came despite Mohamed saying consumers had begged for “help, for mercy and for relief” during the public hearings the inquiry held. “It was gut-wrenching,” he said.

“It was most disturbing and sad to see elderly, vulnerable, pensioners sob and plea with government for help and relief at the public hearings.

“A Free State-based consumer related a blow-by-blow account during her oral submission of how she had planned to take her life to escape her debt-stricken circumstances, which were occasioned by ‘a mistake’ she made when she signed up for a lifelong ‘timeshare trap’,” he said.

Mohamed said “the major problems that consumers experience are with the points system within the industry and not with conventional timeshare”.

He said the inquiry recommended that all timeshare contracts, including those involving the sale of points and club membership agreements, be defined as fixed-term contracts with a maximum term of 24 months rather than the lifetime term that applies to many of the current contracts.

But this would also require changes to the law and that will take time.

The inquiry is recommending that a “comprehensive piece of legislation that centralises regulation of the timeshare industry in SA” be passed, to bring consumer protection in the timeshare and vacation ownership industry on par with the rest of the world.

The trade and industry minister had agreed there was a need to overhaul the regulation of the timeshare industry, Mohamed said.

The inquiry has also recommended that a new regulator be created and tasked with enforcing compliance with existing and future legislation and using consumer protection measures being used internationally.

He said the inquiry’s “wide-ranging” recommendations extended beyond timeshare points to the marketing and management of holiday clubs; credit- and contract-related issues; the quality of service and availability of accommodation in the industry; and issues of competition.

The recommendations would be implemented over a medium to long term “depending on the willingness of industry to engage in good faith with us and other stakeholders”, Mohamed said.

The commissioner added that the NCC was encouraged by the response received from Vacation Ownership Association of SA on behalf of its members.

The NCC has also taken up breaches of the National Credit Act, the Competition Act and the Companies Act raised in consumer complaints up with the relevant regulators.

The NCC “resorted” to an inquiry 18 months ago after attempts to address the issues using the CPA, which included filing matters for adjudication with the NCT, had failed.

The inquiry has attempted to find a way to address the plethora of multi-jurisdictional issues raised by consumers over years, Mohamed said.

The inquiry was led by Diane Terblanche, Sandile Mpungoshe and Aubrey Ngcobo and included submissions from interested parties, consumers, industry participants, regulators, researchers and academics.