Statement read by Commissioner Ebrahim Mohamed at the release of the report on the inquiry conducted into the Vacation Ownership / Timeshare Industry
Moderator;
Senior officials from the Department of Trade and Industry;
Deputy Commissioner, Ms Thezi Mabuza;
Consumer Goods and Services Ombudsman, Ms Magauta Mphahlele;
Representatives from fellow regulators and Provincial Consumer Protection Authorities present;
Affected and interested consumers;
Members of the media;
Officials from the NCC present;
Ladies and gentlemen;
Good morning.
Thank you for availing yourselves to be part of this important, and much anticipated occasion.
On 18 May last year the NCC launched an inquiry into the vacation ownership or timeshare industry after a lengthy struggle to resolve consumer disputes with this industry. The NCC resorted to an inquiry after exploring various other options provided by the Consumer Protection Act, which included filing matters for adjudication with the National Consumer Tribunal. Regrettably, most of our earlier attempts to deal with consumer challenges did not yield positive results, and after assessing our approach and seeking legal counsel, we arrived at the decision to institute an inquiry. Our journey to get to this point has been long and challenging. The NCC was faced with the task of finding the best possible way of addressing the plethora of multi-jurisdictional issues raised by consumers over years. This situation was exacerbated by the very nature of the timeshare product offering with all its legal and structural complexities.
Ladies and gentlemen;
The report to be released here today is not the outcomes of an investigation in the context of the Consumer Protection Act, but rather that of an inquiry meant to unravel and understand the complexities of the industry, assess the extent of consumer challenges, and to after assessing all facts and balancing them with research, make recommendations to improve consumer protection within the timeshare industry.
In addition to extensive research which the experts undertook prior to, during and subsequent to the formal inquiry process, the formal inquiry was conducted by way of public consultations and written submissions. Interested parties, including consumers, industry participants and regulators were invited to make their submissions orally and in writing. A few academics, students and researchers with interest in the timeshare industry also attended some sessions.
The public consultation sessions were held across the country.
Before I proceed, I’d like to take a moment to express my appreciation to the legal experts who led this inquiry. Our gratitude goes out to Ms Diane Terblanche, Ms Zandile Mpungoshe and Mr Aubrey Ngcobo for the dedication and hardwork they displayed throughout the course of the inquiry.
I have approved their report, and I’ve accepted its recommendations. The recommendations that were made are mainly to correct the structural and behavioural problems in the industry, as identified. These recommendations are aligned to the themes which had been identified by the panel of experts.
The vacation ownership industry in its current state, has been a source of frustration and anger to many consumers. As the NCC we witnessed this when consumers made oral submissions during public hearings that were held in the nine provinces of our country. It was most disturbing and sad to see elderly, vulnerable, pensioners sob and plea with government for help and relief at the public hearings. The greatest discomfort I experienced though, was when a Free State-based consumer related a blow-by-blow account during her oral submission, of how she had planned to take her own life to escape her debt-stricken circumstances, which were occasioned by “a mistake” she made when she signed up for a lifelong “timeshare trap”.
I want to emphasise what I said at the launch of the inquiry. I said: “the NCC has always held the view that complaints from timeshare consumers are valid and warranted. We adopted this view based on our assessment of individual complaints over time, thousands of them …which had been lodged against holiday clubs and their value chain role players over the past nearly two decades since I joined the former Office of Consumer Protection at the Department of Trade and Industry.”
Submissions made by consumers during public hearings further supported this view. Throughout the inquiry however, we had to remain objective and loyal to the processes of the inquiry. It is not easy to hold back on emotions when you hear and see people beg for help, for mercy for relief. And it was most definitely gut-wrenching!
Moderator, ladies and gentlemen;
The report, key among other things, detail findings on industry-wide ills as well as club specific ones, which can be addressed by giving effect to specifically categorised recommendations provided therein. The NCC anticipates that these recommendations will be implemented over a medium to long term, as well as in the short term, depending on the willingness of industry to engage in good faith with us and other stakeholders.
The inquiry panel submitted a report in accordance with the approved Terms of Reference and have made wide-ranging recommendations which I considered. They relate to the following:
- Management of the Clubs;
- Competition issues;
- Marketing;
- Credit related complaints / matters;
- Contracting;
- Legislative reform;
- Points in the Vacation Ownership / Timeshare industry;
- Quality of service / availability of accommodation;
- Miscellaneous matters;
- Engagement with industry on existing complaints.
The report covers all aspects of the inquiry in extensive detail. For the purposes of this occasion however, I would like to highlight some of the recommendations. The major problems that consumers experience are with the points system within the timeshare industry, and not with conventional timeshare. The recommendations made therefore lend themselves to the points system. I also need to highlight that the majority of the recommendations relate to a revised regulatory framework that specifically deals with the industry in question.
Recommendations relating to the revision of the regulatory framework are:
- That the Minister of Trade and Industry prescribes in terms of the CPA certain information, including the manner and form of such information that intermediaries must provide to consumers before transactions between consumers and clubs can be concluded.
- That all timeshare contracts including Purchase of Points and Membership Application Agreements be defined as Fixed Term Contracts, running for a fixed, shorter period, subject to renewal by agreement between the Club / Developer and the member. The limit should attach to Purchase of Points and Membership Application Agreements.
This can be attained in the short term through promulgation of regulations in terms of Section 14 of the CPA;
- That the rights accorded to consumers in terms of Section 14 of the CPA should apply automatically, in the event of a consumer cancelling.
Notwithstanding the recommendations in terms of the CPA, there is also an opportunity to consider also revising the Property Time Sharing Control Act. The following recommendations therefore relate to the Property Time Sharing Control Act:
- That by way of a Regulation to be promulgated in terms of Section 12 of the Property Time Sharing Control Act (PTSCA), a coordinated, streamlined and simplified disclosure regime be provided for therein in terms of information Clubs / Developers must disclose to potential members;
- That the Minister promulgates Regulations in terms of Section 12 of the PTSCA prescribing the information which should be disclosed in writing by a seller to a purchaser prior to the signature of any contract by a purchaser;
- To overcome a game of “hide and seek” and preventing consumers from giving notice of cancellation within the cooling-off period when they attempt to do so, a provision be prescribed by the Minister, in terms of section 12 of the PTSCA, for the Club to disclose an email address where notice of cancellation is deemed to be received once proof of remittance is provided;
- That a platform be created for cashing-in, exchange and re-sale of points. Existing entities currently performing this critical role such as Cape Escape are tainted by their lack of independence from industry and the absence of known guidelines and methodology for valuation of points, to which consumers are privy;
- This can be done in two phases: immediately in terms of the Regulations proposed to be passed in terms of Section 12 of the PTSCA and in the longer term, through a platform that can be detailed in the proposed industry focused or specific legislation.
- That the Minister consider delegating administration of the PTSCA to a specific regulatory authority to administer and implement the PTSCA, once the proposed amendments are effected, in order to give effect to its provisions to advance consumer
protection;
All-in-all, in the medium to long term, the following proposals were accepted by the NCC.
They are:
- That a modern, industry focused, comprehensive piece of legislation that centralises regulation of the timeshare industry in South Africa be passed, in order to bring consumer protection in the timeshare/ vacation ownership industry in RSA on par with the rest of the world.
- That a new regulator be created and tasked with enforcing compliance with existing and future legislation. [The Panel has done extensive research into practices internationally relating to consumer protection measures in the timeshare industry and there is immense benefit to be obtained from benchmarking in jurisdictions that are trailblazers and purveyors in this regard], and;
The NCC has held discussions with the Minister of Trade and Industry in relation to the recommendations and the need for him to consider a revising the applicable laws within his administration in order to further consumer protection within South Africa, and particularly within this industry. Minister has in principle agreed that there is a genuine need to overhaul the regulatory framework in order to ensure consumer protection. Work in this regard has already commenced within the Department of Trade and Industry.
There are other recommendations that relate to referral of issues raised in complaints which have already been canvassed with the relevant regulators. These are possible violations of:
- The National Credit Act (NCA) [to be dealt with by the National Credit regulator];
- The Competition Act [to be dealt with by the Competition Commission of South Africa];
- The Companies Act [to be dealt with by the Companies and Intellectual Property Commission];
These recommendations and others that are found in the report were provided to holiday clubs during September this year to give them an opportunity to respond to them.
The NCC was encouraged by the response received from Vacation Ownership Association of Southern Africa (VOASA) on behalf of their members. In their response VOASA stated amongst others that:“the Association has reviewed the report and received positive feedback of members’representatives, who met with the NCC Commissioner and executive staff, on 19 September 2018 in Pretoria to discuss the said report.”“The Association confirms that the Industry is committed to engage in discussions to resolve the matters addressed in the report; and to follow due process as provided for in relevant legislature [sic].” Moderator, ladies and gentlemen;
In giving effect to these recommendations government will work with the industry to place it on a positive trajectory.
It is no secret that the industry contributes vastly to the country’s GDP. From the outset, our intention was never to punish the industry. Ours, was to rid this industry of its ills and to ensure that consumer transactions are fair and compliant with the law.After all, the NCC has a duty to ensure the social and economic well-being of consumers, by exercising its legal mandate.
Because of the urgency related to existing consumer complaints, in the short term, I have instructed my team to immediately begin engagements with the Consumer Goods and Services Ombud (CGSO) in order to amongst others, assess the extent to which industry is willing in the meanwhile to allow consumers to exit contracts without penalty. In particular, the nefarious in-perpetuity contracts. I hereby call on, and encourage individual clubs to resolve club specific complaints without any further delay. These must be resolved speedily.
I thank you.
