COALITION POSITION: REGULATORS AND CONSUMER PROTECTION AGENCIES SHOULD INVESTIGATE THE APPEARANCE OF MASSIVE COLLUSION BY DEVELOPERS TO KILL LEGITIMATE EXIT COMPANIES

ORLANDO — In an exceedingly frank discussion of industry issues, timeshare executives revealed their plans to deconstruct the exit industry, brick by brick, through lawsuits, lobbying regulators and plying politicians to do something they have been unable to do on their own —- get rid of exit companies and lawyers who help consumers get out of timeshare contracts.

At the timeshare industry’s annual developer conference in mid-April, Diamond Resorts CEO Mike Flaskey told an audience of 1,000 execs that “rogue, third-party” exit companies are engaged in borderline “criminal” behavior that damages developers and customers alike.

“The disruption that we have seen within our industry has come from meanness, has come from badness, has come from people that can’t get a job on Main Street that have gone over to the dark side. There are even people that have made their living within this industry….and they’ve gone over there because they too think they can make a fast buck,” he said.

“In our world, we have made a decision, we’re not going to sit back and stand for it,” Flaskey continued.  “We have filed 11 lawsuits against these rogue third-party exit companies. Of the 11, we have gotten permanent injunctions to shut seven of them down.  We’ve had two lawyers disbarred because a part of this whole scam are lawyers that are in the middle of it that are nothing but paper pushers.

“In the end,” he added, “these (exit company) people are charging people from $5,000 to $60,000 to do something….that all you have to do is call my company, or any of our companies, and we’ll give them a way to transition, or to have dignity to exit, and get out of their timeshare if that’s what they want to do, without these folks having to come in unethically and take money from them.”

Flanked by other CEOs who nodded approvingly at his comments, Flaskey promised that Diamond would continue its legal attack on exit companies “with full guns blazing.”  We are not going to slow down in this process.  The things we have seen (from the lawsuits) will absolutely blow people’s mind if it becomes public.  We believe there is really, really very clear evidence this could flip over to criminal, very soon.”

Flaskey’s CEO colleagues, Mike Brown of Wyndham Destinations and Tom Nelson of Holiday Inn Club Vacations, echoed Flaskey’s sentiments, but with more diplomacy.  Brown’s company, Wyndham, is also engaged in suing some exit companies for allegedly interfering with customers and seeking to cancel their contracts.  Nelson complained about the “fraudulent” claims made by unnamed exit companies in their radio ads.  Both men called upon the industry to launch a PR counter-offensive to blunt the negative messages and promote positive stories about the industry.  All agreed that 2019 is the year for the industry to reclaim the “narrative” from exit companies that advertise heavily on the radio and Internet.

(What Flaskey did not know at the time — in mid-April — is that his company would settle a lawsuit, in early May against, a Florida attorney who has helped extricate Diamond customers from lifetime contracts for seven years.  The settlement was not a win for Diamond. See our prior posting on this subject.)

Flaskey’s rant against exit companies — good and bad, he made no distinction — was welcomed by a tenured timeshare audience that is largely responsible for creating the exit industry in the first place.  The exit industry, which includes legitimate companies along with many scammers, grew up in the vacuum that was created, years ago, by developers’ deliberate unwillingness to help longtime customers who wanted or needed, after decades of usage, to get rid of their timeshare obligations.

During the CEO panel at the American Resort Developers Association (ARDA) conference, Flaskey and his fellow CEOs were asked about the most difficult challenges facing the timeshare industry.  They discussed marketing to Millennials and integrating technology and social media into their programs to keep pace with changes in customer behavior.  All legitimate topics for discussion.

But their biggest issue, they said, was finding a way to combat the negative narratives about timeshare that are appearing in newspaper headlines, Internet posts and paid advertising from exit companies.  That’s what keeps them up at night — during a year that otherwise celebrates the 50^th anniversary of timeshare.

DEVELOPERS LAUNCH LEGAL, LOBBYING AND LEGISLATIVE PROGRAMS AGAINST EXIT FIRMS

A major component of the industry’s push to reclaim the narrative about timeshare is a simultaneous campaign to rally regulators, state and federal, to crack down on exit companies that solicit owners to cancel their contracts.  At ARDA World, ARDA’s legislative team said they lost a key showdown over an anti-exit bill in Florida earlier this year but vowed to resurface the legislation in 2020.  The Florida legislative effort collapsed, during a televised committee hearing on ARDA’s bill, HB435, when three members of the committee volunteered having negative timeshare experiences.  Those lawmakers also said they would not support a bill that limits a consumer’s right to seek legal help to solve a timeshare problem.

ARDA lobbyists are actively engaged with legislators in Arizona and Nevada, as well, but their primary thrust this year was Florida, which is home to half of all the timeshares in the US and is considered, politically, a very pro-timeshare state.  In all, ARDA is monitoring and spending money on lobbyists in 13 states.

At the federal level, legislative activity on trade and timeshare issues has stalled because of what several members described as the “chaos” in Washington.  ARDA reps said, however, that they are talking to the Federal Trade Commission about the industry’s complaints against exit companies.

DIAMOND BOASTS OF LEADING ASSAULTS ON EXIT COMPANIES

Diamond’s leadership in the anti-exit company campaign is fitting, in a way, because, according to complaints in the media and on Internet forums, it does not have a great track record of helping consumers who seek exits.  Diamond’s points also have little to no value on the resale market, which compounds the problems for owners who want out.

“Diamond is not alone, but it’s unique in how many complaints it generates from consumers who’ve been upsold to buy timeshares they don’t need and cannot use,” said Brandon Reed, CEO of Timeshare Exit Team and founder of the Coalition to Reform Timeshare.  “Based upon the feedback we’ve gotten from customers, Diamond’s sales teams celebrate new sales to elderly couples who are way beyond their vacation years.  We never see similar complaints against companies with strong pro-consumer reputations, such as Disney and Marriott.”

Disney and Marriott executives did not participate in the CEO panel where Flaskey excoriated exit companies, in general, for allegedly interfering with lifetime timeshare contracts.  Those who participated, however, agreed that the exit industry was one of the biggest threats to the ongoing, 10-year growth, of the timeshare retail industry, where companies sell week-long intervals for an average of $20,000 or more.

Timeshare companies, individually, embarked on an ambitious strategy two years ago to sue exit companies and lawyers who were (allegedly) helping consumers.  Exit companies cried foul, claiming there was an industry-wide conspiracy afoot to kill the exit companies.  No one listened.  People in the industry just winked.

Turns out, the conspiracy theories appear to be accurate.

Timeshare Exit Team, which has helped over 17,000 customers get out of contracts in seven years — is battling five simultaneous lawsuits from several companies, including Diamond and Wyndham.

It’s not a battle for the timid.  Other exit firms, including some who were alleged scammers, have folded in the legal assault from developers.  Timeshare Exit Team, among other legitimate exit firms, will not fold.

Diamond, and Flaskey, have a unique role in this kabuki dance of developers against exit companies.  Diamond was a publicly traded company several years ago, then was bought out by an investment firm, Apollo, which is now preparing to spin Diamond back out, as a new public company.  These maneuvers have increased scrutiny of the company’s financial fundamentals, business model, litigation, loans and customer complaints.  In addition to selling timeshare points, Diamond drives additional, and substantial, revenue from managing timeshare resorts and financing purchase loans, among other initiatives.

“I don’t blame Diamond or any other company for going after scammers,” Reed said.  “But I am outraged that they lump my company in with the bad actors in timeshare.  We’ve run a legitimate business, for years, and are proud of our reputation.”

INDUSTRY PURSUES PR CAMPAIGN FOR RESPONSIBLE EXITS

At ARDA World, reputation issues dominated many panel discussions.  The developers’ strategy is two-fold: go on offense to promote timeshare; then go on defense, hard, to disrupt the exit companies.  Makes sense, since the overall goal is to increase retail sales to a next generation of buyers while older owners drop out, die or exit.

One effort, announced in the fall of 2018, is the industry’s so-called “Coalition for Responsible Exit” program, where participating companies, including most of the major developers, announced that they have implemented (or already had) reasonable exit options for longtime customers.  These options include deed-backs, hardship surrenders and buy-backs (at the discretion of developers, not owners).  These supposedly user-friendly options complement the industry’s current arsenal for dealing with problematic customers who want out: collections, foreclosures and threats to ruin an owner’s credit.

According to Ken McKelvey, chairman of the ARDA-Resort Owner Coalition (ARDA-ROC), only 40-50 percent of owners actually opt-out after contacting their company for a voluntary exit.  The remainder, he said, are open to upsells — where they’ll buy more timeshare points, rather than get rid of what they own.

To combat the continued growth of exit companies, McKelvey said all developer companies should adopt an exit strategy that includes their call centers.  At the same time, companies should report all complaints about customer experiences with exit companies to state attorney generals.

At the ARDA-ROC meeting, ARDA staff said the agency is already spending $230,000 per month on social media advertising to promote a positive pitch about the industry’s efforts to help consumers.

That’s a huge number in online advertising circles.

“We have built a solid foundation with the Coalition but I know there is still much work to do,” said Jason Gamel, a former Wyndham VP and newly installed president of ARDA. “I look forward to continuing to work with our members to change the industry narrative and enhance the way we proactively communicate our owners’ stories.”

It’s about time…but we may be way too late.

The Coalition to Reform Timeshare is a consumer advocacy group dedicated to helping consumers who have issues with their timeshares.  If the developer community was truly focused on helping existing customers, CRT would not exist.

“It’s crystal clear, now, that developers have been collaborating, behind the scenes, to eradicate all exit companies.  We think this is the kind of collusion that should be investigated by regulators and lawmakers who aim to protect consumers from unfair business practices,” Reed said.