What’s The Latest With Timeshare Exit?

If you are like most people and not living in timeshare world on a daily basis, you may not have noticed a couple of announcements over the last week or so regarding the so-called “timeshare exit” industry. That’s okay – but since we live this industry every day, we thought we’d discuss this since it is a pretty important issue when it comes to owners looking to sell a timeshare.

The first announcement had to do with the case brought by Washington State Attorney General Bob Ferguson against a company called Timeshare Exit Team. You may have heard of this company. Talk show host Dave Ramsey certainly has and has gone on several rants about how the industry has essentially forced the company to fold because TET is trying to get people out of their timeshares.

Ramsey was also taking advertising dollars from Timeshare Exit Team and was upset when they had to pull their ad dollars to lawyer up and pay their mounting legal expenses. Money that I suppose he feels would be better off in his pocket. Yeah, there’s that little detail. But I digress.

Decision Against Timeshare Exit Team

To recap, the Washington AG filed a lawsuit against Timeshare Exit Team in February, 2020, “alleging numerous unfair or deceptive business practices related to services to ‘exit’ consumers’ timeshares” according to the statement on the AG’s website.

Fast forward to 10 days ago, and the AG’s office announced a settlement with TET which included a $2.6million fine for “its deceptive timeshare exit practices” according to the AG’s press release. An additional $19million in fines could materialize if Timeshare Exit Team does not comply with the ongoing terms of the agreement, but indications are that they will. $19million is a fairly big incentive to comply.

Some of the more impactful areas of the decision in relation to timeshare owners were:

• The company considered foreclosure on a timeshare as an acceptable form of exit, which can leave an owner with significant negative credit implications.
• Its money back guarantee which, according to the AG, has not been honored to thousands of the company’s customers. About 16,000 cases are still unresolved according to Ferguson’s office, many of which have been in limbo for at least three years.
• Advice given by the company for customers to stop payments to resorts and ignore communications from their resort.
• Congratulating some owners on a successful exit, when in reality no transfer took place.

In response, the company has issued an apology and retracted earlier statements it made regarding the lawsuit.

It is no secret in the industry that timeshare exit companies such as TET have been a thorn in the side of resort developers for years. Their emergence in the early part of the last decade is seen as a major stimulus driving the big brands into developing their own takeback programs. ARDA’s Responsible Exit program launched three years ago was another industry response to the efforts of the exit companies.

Still, there are clearly detrimental exit companies that are only out to get cash out of owners.

Legislation On The Way

The inevitable move toward legislation is the customary next step in these types of situations, and North Carolina appears to be at the forefront of this effort. The Tar Heel State (with apologies to non-UNC fans) has passed the first exit-specific legislation in the country designed to curb the efforts of these businesses.

The new rules announced this week affect not only what these companies can advise but also how they fundamentally operate. Just a few takeaways are:

• The prohibition of exit companies to advise owners to stop payments on their timeshare fees.
• No charge if an owner’s case results in foreclosure or repossession.
• No cost if an owner gets out of their timeshare by themselves.
• Fees held in escrow by the exit company.

The tenets of the law are significant, especially the requirement to hold money in escrow.

Licensed real estate firms such as ours are legally required to hold money in escrow until a sale is closed to protect the parties involved, so this isn’t a new concept. Just for exit companies.

I’m also interested in the definition of the term “repossession” and the practical effects of this section. Does this include a resort’s ability to takeback a timeshare, in essence repossessing it? With the number of deed-back programs in place, this could have a substantial impact on exit companies.

There is little doubt that this type of legislation will gain momentum in other state capitals, with the North Carolina bill most likely used as a template for similar laws in other states. Legal firm Greenspoon Marder, which worked on the language of the bill, is a major player in the American Resort Development Association, so look for ARDA to take a more prominent role on this issue across the country when state legislatures reconvene next year.

Not Only TET

To be fair, this lawsuit and subsequent decision from the Washington AG isn’t the only legal action against an exit company, just the most visible one. Scrutiny has emerged against exit companies in various parts of the country. A few are:

• Timeshare Termination Team’s disappearance and whistle blower claims.
• Castle Law Group PC’s closure in Tennessee due to the disbarment of its lead lawyer.
• Missouri Attorney General judgement against exit firm Martin Management Group LLC.
• Bankruptcy of American Consumer LLC and subsequent media exposure.

There are other examples, which is why it is important for timeshare owners to understand the tactics involved with exit businesses and how to protect themselves.

What to Look For

Timeshare exit companies basically implement the same maneuvers and messaging when it comes to engaging with owners. It revolves around:

• Getting owners out of timeshares they no longer want or use, rather than selling it.
• Promises of services that, in most cases, owners can conduct themselves.
• High upfront fees.
• Some type of supposed guarantee.

A number of companies either use the services of legal teams or are themselves lawyers claiming to work on behalf of consumers. It is important to know the difference since legal teams come under a very different regulatory regime than the non-existent supervision of exit companies. This is one of the areas that apparently got Timeshare Exit Team in hot water.

Fees as high as $10,000 are reportedly charged by exit businesses promising to relieve owners of their timeshares. Some owners may think this is worth the money, but remember the facts mentioned above if you enter this Russian roulette exit game.

Also – understand that the majority of these companies do not sell timeshare, so you will not get a return for your ownership. They want you to just give it back and pay thousands of dollars for the privilege.

Steps you can take on your own without the need for an exit company to transition you out of your ownership are:

• Contact your resort or management company to see if they have a relief program.
• Negotiate directly with your resort. Some resorts now have a policy that they will not communicate with exit companies.
• No cost process – communicating with your resort doesn’t cost you anything, while exit companies often charge thousands of dollars to do the same thing you can on your own.
• Research your rights – be familiar with the timeshare statutes in the state in which your resort is located. You may have rights available that you are not even aware of, such as under a rescission statute.
• Sell your timeshare with a licensed timeshare resale broker.

Yes, I’ll admit that the last one is a bit self-promotional, but the fact is that you can contact a licensed agent for a consultation with no obligation and no costs involved.

Why wouldn’t you?

Resale brokers such as us do not charge upfront fees, so owners don’t pay to sell until after the sale is closed and the timeshare is transitioned out of their name. Legitimate closing companies are used and your transfer will be properly documented.

The regulatory environment is much stricter for brokers than any other type of third-party company operating in the secondary market. Because we come under state real estate law, there is a much higher level of accountability – which is good protection for the consumer.

Before talking to a timeshare exit company, give us a call on 877-624-6889 or click here to leave us a message. It could save you thousands of dollars in the long run.