Nightmare in paradise: the truth about timeshare exit companies

Timeshare vacations have been a hugely popular way for Americans to enjoy vacations year after year. In fact, about 7.1% of U.S. households, or just over 9.6 million, own at least one type of timeshare, and the vacation ownership industry continues to experience growth. Over the past five years, timeshare industry sales have increased by more than 26%—an average of 6% annually—indicating that Americans are continuing to invest in vacations with their families and friends. But, unfortunately, a disturbing new trend has emerged that is victimizing timeshare owners and threatening their ability to enjoy the unique timeshare experience. 

Over the past two years, the vacation ownership industry has seen an alarming increase in timeshare exit scam complaints and litigation due to unscrupulous third-party companies who market themselves as resellers or solicit owners with promises to provide timeshare “transfer” or “exit” services. These so-called “timeshare exit companies” make false promises in exchange for large, upfront fees, but many timeshare owners report that these guarantees are rarely fulfilled. As a result, these victims are left without their money and often find themselves in additional financial peril with increased debt, damaged credit or both.

Issues related to timeshare exit scams have become so significant in scope that the Better Business Bureau (BBB) recently issued a study surveying complaints and documents from more than 400 consumers who believe they had been victimized by third-party exit companies. As part of the study, they conducted more than 70 in-depth phone interviews with these consumers. They found that timeshare owners were convinced to pay large upfront fees, ranging from $1,000 to more than $30,000, for promised timeshare exit services that were then not delivered. Several consumers said the exit companies turned their cases over to law firms or others that also failed to help them.

The BBB’s report found that one singular Springfield, MO-based timeshare exit company, Vacation Consulting LLC, is accountable for more than $670,000 in reported losses. One couple in their 80s told BBB that they paid the firm $18,000 on promises that the business would get them out of their timeshare, and they have received nothing to date.

In August 2018, a Tennessee attorney was disbarred related to 90 consumer fraud complaints for tricking timeshare owners into thinking they canceled their contracts. The attorney’s firm was then forced to cease business operations. There have even been instances of individuals stealing the identities of accredited lawyers in order to take advantage of timeshare owners. Just last month, the FBI had to get involved when a scammer stole the identity of a Florida attorney and targeted timeshare owners, charging them fees in exchange for the promise of selling their timeshare. He was ultimately sentenced for felony fraud.

In September, another large timeshare exit company charged thousands of dollars in fees and then filed bankruptcy. But even that news couldn’t change the fact that a few months later, 300 people lost $15 million to a timeshare exit company scheme in Florida.

The most recent negative legal outcomes for timeshare exit companies came in April when Florida-based companies accused of encouraging people to exit their timeshare units filed bankruptcy in the midst of lawsuits. And, even more recently, a federal bankruptcy judge, while appointing a federal trustee to oversee the bankrupt TPE, stated that “the business of the debtor appears to be engaged in substantial fraud and dishonesty” and “the debtors, despite being paid substantial upfront fees from timeshare owners, have minimal cash in their bank accounts and have insufficient reserves to cover potential 100% ‘guarantee’ claims they made to thousands of timeshare owners.”

The rash of complaints and legal proceedings prompted the American Resort Development Association (ARDA) to issue a warning to consumers about these companies, encouraging owners who believe they have been unfairly taken advantage of or defrauded to contact their state Attorney General, local law enforcement or ARDA directly.

The BBB advises timeshare owners to stay aware of several red flags, including calls or emails claiming to have an “interested buyer” for a timeshare, callers claiming to be a representative of ARDA or ARDA-ROC, a company that promises to modify, cancel or transfer an owner’s timeshare for a large upfront fee, a company that requests an upfront fee, or the wire transfer of money for a “service,” “tax” or other “requirement” for the sale or transfer to be completed. The bottom line is that if an offer sounds too good to be true, it likely is.

Thankfully, advocates like ARDA are spreading awareness about timeshare exit companies. Given the current lack of regulations to protect timeshare owners from deceptive and, in some cases, fraudulent practices of exit companies, it’s time for state legislatures to pass smart regulations that will protect consumers and require truthful disclosures, including the risk of a foreclosure and damaged credit, and a written contract.

Until stricter laws are put in place, policymakers and industry leaders must enforce measures and tougher penalties on offenders across the country. And we want to see regulatory offices taking action against these companies. Consumers have a right to enjoy timeshare vacations with their loved ones without the threat of fraudulent exit companies who want nothing more than to run off with their money.

When people invest in vacations, they invest in happiness and a lifetime of memories. The fact that there are third parties out there who want to ruin them—both personally and financially—is deplorable, and they must be stopped.

Mike Flaskey is the CEO and director of the board of Diamond Resorts. He has more than twenty-five years of executive leadership experience in public and privately held companies, with a key focus on a growth-oriented approach. Throughout his tenure at Diamond Resorts, he has shifted the traditional vacation ownership marketing and sales model to a hospitality-infused process that includes a high-touch upstream engagement stance, thus providing owners and guests with a service-first approach. Prior to Diamond Resorts, Flaskey held senior executive roles with Starwood Vacation Ownership and Fairfield Resorts.

Let us know what you think… To comment on this opinion piece, or to voice your own opinion about pertinent industry topics, please email Editor-in-Chief Christina Trauthwein at [email protected] We’d love to hear from you and share your point of view.

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