Sales unchecked by complaints, lawsuits

South Carolina has more time shares than every U.S. state except Florida, but the agency that regulates the industry has been hamstrung by budget cuts.

Despite 32 pages of laws on time shares, South Carolina's system of consumer protections is failing aggrieved buyers - people who thought they were buying a product, rather than paying their way into a tricky system of bidding and swapping and scrapping for service.

The South Carolina Department of Consumer Affairs many complaints about time shares in the past three years; almost one every week. In recent years, as the industry surged and a wave of new units went up from the Grand Strand to Beaufort, the state cut funding for oversight. If a time share company decided to bilk buyers or oversell a resort - which would be illegal - the commission admits it might not catch the fraud. Its investigators don't audit time share companies to see if the number of points they sold is more than can be accommodated in their respective units in a given year. And the federal government leaves time share regulations to individual states, according to a spokeswoman with the Federal Trade Commission.

South Carolina also stopped screening time share promoters in October 2003. Would-be sales representatives used to have to pass a 50-question test on how well they knew the state's time share laws. Abolishing the test was a move to hold the development companies responsible for their employees, as opposed to the state treating salespeople like independent contractors.

The rescission period was extended from four days to five in 2003 and the commission voiced support for a longer window. Buyers in Florida, the No. 1 time share state in the country, have twice as long to cancel a signed contract, 10 days. Arizona and Hawaii both give consumers a full week to rescind. And the United Kingdom requires that time share companies honor a 14-day cancellation period.

Lawmakers did pass a law that requires an attorney paid by the consumer to be present at time share closings, unless the buyer signs a document waiving that right.Consumer advocates said the law will just add one more document to the stack of papers that buyers generally sign with little review.

Most of what state regulators do now is broker peace accords between disgruntled buyers and the companies they bought their units from. Developers sometimes relent to commission pressure, although many are unyielding to complaints from buyers.

In 1981, when lawmakers first started to regulate time share sales, the General Assembly established a pool of money dubbed the Vacation Time Sharing Recovery Fund to reimburse consumers who lose money to unscrupulous sellers. At one time about $250,000 was available for aggrieved time share owners, but it never was used to make buyers whole. The fund has been empty for years, siphoned off by lawmakers for other projects. The Real Estate Commission said the money was never needed.

An effort at ethics

Since it formed its own trade group in 1969, the time share industry has sought to police itself. It has battled a bad reputation for a long time, a reputation that harms the many upstanding players in the time share game, according to Howard Nusbaum, president of the American Resort Development Association, the time share industry trade group.

"We're serious about it," Nusbaum said. "We were founded to protect the good guys, because there are still some bad guys. ... It would be counterintuitive to purposely have an industry that's trying to be unscrupulous."

The association lobbied in favor of many state time share laws and has a 25-page "code of standards and ethics" that says developers must avoid false statements and honor consumers' rescission rights, among other things. The document also includes a "customer bill of rights" that reads: "You are the most important person in our business; without our owners and potential owners, we have nothing to offer our community or our industry."

Nusbaum said those kinds of consumer protections have fueled time share sales in recent years. Big-name corporations such as Marriott International Inc. and Walt Disney Co. grabbing huge swaths of market share has not hurt either. But the industry ethics code does not preclude developers from managing the units they sell. And the association acknowledged that illegal sales tactics remain one of the industry's biggest problems.

When asked about recent complaints and lawsuits, Nusbaum said most come from consumers who don't fully understand what they are buying.

"It's true of any industry," he said. "If I went and bought a brand new computer and didn't know how to use it, I wouldn't be too happy about it."

In a much publicized lawsuit filed in Florida in July 2005, four plaintiffs allege that they were never able to make reservations at the Fairfield Inc. resorts where they had bought time share points. The same resorts, however, offered to rent units to them at rates similar to a hotel.

A rising tide

Byron Wiegand, a former time share developer who now owns a California time share resale firm, said there are "worms" in the industry, "people who have to steal" sullying the entire market.

"They're making so much money it's scary, but as far as the poor customer is concerned, I feel sorry for them," Wiegand said. "It's a shame because if they would straighten up their act, it's a good product. Underneath all this hocus-pocus, it is a good product." Nusbaum contends that the time share industry was never that corrupt, even in its early days. He said there were a lot of reputable players and some "colorful, bad ones."

"And you know which ones are going to make the news," he said. "I think that today's time share industry has been a tide that has risen all boats. ...You've got some trophy, nameplate publicly traded companies in this industry that aren't going to do anything to tarnish their image or hurt their shareholders."

Marriott International Inc., one of the world's largest hotel companies, got 15 percent of its revenue last year from time shares.

"The product has continued to evolve and be better and better," said Marriott spokesman Ed Kinney. "At one point there was a threshold that customers would be willing to pay for a time share, but now it's hard to say. We have weeks in Hawaii going for $114,000 a piece, and they're selling out."

Marriott has one of the best reputations in the time share industry, although it has an "unsatisfactory record" with the Better Business Bureau, including a handful of unresolved complaints. Kinney said he does not think his company will be affected by lawsuits against some of its competitors and noted that more than 93 percent of Marriott time share buyers are "satisfied" or "very satisfied," according to the company's own surveys.

"If anything else, it's going to allow people to go to those companies that they recognize and they trust the most," he said.

Complaints or not, the industry is showing no signs of slowing down. In a recent report, Bear Stearns, a New York investment bank, estimated that the time share business will generate $42 billion in sales over the next 10 years. The firm thinks big-name developers will continue to post 20 percent profit margins on their fractional units and time shares will soon be owned by 15 percent of "eligible households" - people between 35 and 65 years old who make more than $75,000 a year.

"I'm pretty proud of our industry," Nusbaum said. "We're in a sweet spot right now. "

What exactly is a time share?

Time shares are residences sold off in chunks of time, so that a buyer owns a fraction - such as one week - of a development, rather than buying an entire house, apartment or condo. Buyers may get a deed or just a contractual right to use the property for a week or two a year. They are sold in the following three ways:

Fixed week: Buyer occupies a specific unit during a specific week or weeks every year.

Floating week: Buyer occupies a specific type of unit for a set amount of time within a certain season or defined window of time each year.

Points: Buyer uses a prescribed amount of points - or timeshare currency - to book any unit in any of the seller's resorts at any time of year.

Major players in the time share industry

Wyndham Worldwide Corp. 17,000 units 140 properties

Marriott International Inc. 10,334 units 52 properties

Sunterra Corp. 7,030 units 59 properties

Starwood Hotels and Resorts Worldwide Inc. 6,000 units 19 properties

Hilton Hotels Corp. 4,272 units 40 properties

Bluegreen Corp. 3,141 units 21 properties

Walt Disney Co. 2,400 units 7 properties

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