Timeshare Resale Scams: A Classic Case of Problem, Reaction, Solution
By now, it’s common knowledge that timeshare resale scams have exploded over the last couple years. Most often these cons tend to take the form of a fake timeshare resale company promising the timeshare owner there’s a buyer lined for their timeshare, the only requirement is the owner pay thousands upfront in order to close the deal. Of course, these ‘deals’ never materialize, and frequently the company has vanished by the time the owner realizes the gig is up. Under existing federal and state laws these ‘buyer waiting’ timeshare scams involve the commission of multiple felonies, including but not limited to mail fraud, wire fraud, and racketeering. Prison sentences for these serious crimes can be up to 15 years or more – on par with bank robbery!
According to the ‘official’ story, previously law-abiding individuals, working in the timeshare resale industry, suddenly turned to a life of crime – committing multiple felonies without remorse, or fear of incarceration. You’re expected to believe that after 20 years of existing in relative anonymity, timeshare resale became the country’s #1 scam almost overnight. The FTC received just 819 complaints concerning timeshares resales in 2009, but more than 5,000 in 2011. During the same period, complaints in Florida went up over 1,000%. What happened? How did an entire industry manage to simultaneously collapse into fraud and corruption? … What brought down building 7? Who is John Gault?
Americans do not, as a rule, commit multiple felonies unless they are already criminals. Certainly, they do not choose to do so en masse. The timeshare resale industry did not suddenly turn to crime, and criminals did not ‘hide out’ in the timeshare industry for 20 years waiting for the perfect moment. To understand what has happened to our industry, we must start with the very nature of the beast:
Timeshare developers sold a record $10.6 billion of timeshare in 2007. Since then, largely due to tight credit markets, sales have hovered around $6 billion annually. It costs developers around $7,000 in marketing to sell one timeshare (or 35% of the average $20,000 sale price.) Buyers of timeshares in the U.S. have a cooling-off period, during which their purchase can be cancelled with no penalty. Should a timeshare purchaser happen to visit the internet during this window, he or she would likely find a resale being advertised at the same resort for thousands less. It is in this fashion that timeshare resale companies cause costly cancellations for timeshare developers. At a time when revenues were already down substantially, timeshare resales were the problem for which timeshare developers needed a solution. To accomplish this feat, a tried-and-true method has been used: create a problem, cause a reaction, and offer the solution.
Step One – Problem
Just 6% of Americans own a timeshare, and of these just 8% are motivated to sell their timeshares – that means the entire timeshare resale market affects less than 1% of all Americans. (A niche within a niche, if you will.) Given the small size of the industry, it would seem unlikely that major crime syndicates would be interested in infiltrating it. Yet, somehow, this is exactly what happened: In July 2010, the FBI raided Timeshare Mega Media – a company with (alleged) ties to the Gambino family and La Cosa Nostra, that stole over $5 million from desperate timeshare owners in less than 1 year. An FTC attorney has suggested Timeshare Mega Media never sold a single timeshare.
According to a Tampa Bay Times investigation, the State of Florida neglected to perform required background checks, giving convicted felons telemarketing licenses needed to work in shady fly-by-night outfits. In one instance, half of the 22 employees of now-defunct ‘Ace Timeshare’ were convicted felons, whose criminal records took up over 103 pages of the company’s telemarketing license application – which was, of course, approved. (By April of this year, timeshare developers had already contributed nearly $1 million in campaign donations to Florida lawmakers.)
With these fake timeshare resale companies in place, staffed with convicted felons and with ties to organized crime, step one was complete.
Step Two – Reaction
If there’s one thing Baby Boomers are good at, it’s reacting. Years of knee-jerk ‘there should be a law against that’ reactions have buried the country under tens of thousands of needless laws and regulations. Once the criminals went to work, emptying the bank accounts of hapless timeshare owners while posing as resale companies, the reaction came fast and furious: The Sun Sentinel denounced the entire industry as “fraud-riddled.” A CBS news story, quoting a victim, claimed “there’s [not] an honest person involved in this.” Florida’s Attorney General announced a state-wide initiative “actively pursuing timeshare resellers.” USA Today reported on the plight of fed-up timeshare owners, describing selling a timeshare as “a scam on top of a scam on top of a scam.” Internet posts about timeshare resale scams appeared in record number, with over 200,000 results now appearing on Google for “Time Share Resale Scam.” Something clearly had to be done!
Step Three – Solution
With the timeshare resale industry’s credibility largely destroyed, and an agitated public demanding justice, the time had come to roll-out the solution: Timeshare developers, acting through their lobbying arm ARDA, introduced Florida H.B. 1001, otherwise known as the “Timeshare Resale Accountability Act.” Intended to be a model for legislation nationwide according to ARDA, the act sets up a byzantine maze of new regulations on timeshare resales. From general prohibitions purported to reduce fraud, down to minutia concerning font size and payment methods, H.B. 1001 will regulate all aspects of timeshare resale companies operating in Florida. The Timeshare Resale Accountability Act was quickly passed through Florida’s legislature by a rare unanimous vote, and, despite running on a platform of deregulation, Florida Governor Rick Scott signed the bill into law on June 22, 2012. (Resort Developer representatives attended the ceremonial signing.)
What could be wrong with this new law, you might ask; it does protect consumers, right? Well, not exactly. Violating any of the Timeshare Resale Accountability Act provisions is punishable by a penalty of up to $15,000 per occurrence. The criminal gangs of convicted felons, who have not let the threat of 15 years in federal prison deter them from defrauding timeshare owners, are sure to be stopped in their tracks by a fine!?! No. The only timeshare resale companies affected by the new law are those that are actually real and law-abiding.
The true target of this ‘Solution’ is clearly not the criminals. If you are a timeshare owner, the target of the law is you. The crushing burden of compliance with H.B. 1001 has already bankrupted several Florida timeshare resale companies; leaving thousands of timeshare owners who paid legitimate companies to sell their timeshare with nothing. I would be surprised if there are any resale companies left in Florida by the end of the year. If ARDA succeeds in pushing its ‘Solution’ nationwide, the timeshare resale industry will eventually disappear. While this would solve the developers’ problem of losing sales to the resale market, it would also make being a timeshare owner a permanent condition.
Timeshare Owners, please WAKE UP
The reason why we continue to see the Problem/Reaction/Solution scenario played out again and again is that it continues to work again and again. When timeshare owners, and Americans in general, stop being so reactionary and begin to evaluate a problem using critical thinking skills, the truth will become readily apparent. The collusion of resort developers (ARDA) and their bought-and-paid-for lawmakers is revealed as fascism. The real timeshare resale industry is, and has always been, committed to helping timeshare owners achieve their goal of selling timeshare.
2 comments August 10th, 2012
