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Timeshare Finance and Timeshare Related Products

Banks and finance houses are bracing themselves for another round of Timeshare related compensation claims. This time they are all linked to Timeshare, long-term holiday products sales and the loans which many consumers took out when acquiring the Resorts many Products.

Please note this article may not relate to Credit Cards.

Under the Consumer Credit Act 2006 a provision existed, that in the event an “extortionate credit bargains” existed, the loan supporting that bargain could be quashed. This provision was difficult to meaningfully establish and many claims did fail. Fitting amendments were made and incorporated into the 1974 Consumer Credit Act, whereby the lawmakers introduced a less onerous clause.  The UK court is now assisted by a new concept and test of “unfair relationships” between creditors and debtors (the lender and the consumers).

In the amendment, it is for the lender (not the consumer) to establish that no “unfair relationship” exists between the timeshare seller/developer and the lender. Many have always been convinced that such an “unfair relationship” did exist and so did Mrs Wilson, who actioned a defence when Link Finance Ltd sort to recover monies from her linked loan.  

In the case of Link Financial Ltd v Teresa North Wilson, the High Court decided an “unfair relationship” had arisen and when she acquired a timeshare. The purchase agreement was clearly tethered with the loan.

Wilson did enter into a fixed sum loan agreement with Link Financial Ltd (Link) to fund the purchase of a Timeshare product. The purchase price was just over £20,000. The value did suggest that the product sold, was of value and that value was on that day valued at £20,000.00.

The timeshare resorts agreement provided that, if Wilson failed to make any payment due under the timeshare agreement and within 14 days’ notice, the club [she automatically became a member of] could repossess it, pay off any balances and sell the timeshare again.

Equally the court might have been mindful that the Timeshare could be taken of her for other reasons not associated with financial impecuniosity.

In selling the Timeshare, that product retained a purported value, the court did not have any expert evidence presented to it and as to that value. The Court could not assess the value of the Timeshare or whether or not any value could be used to set of all or part of the loan.

This, in short, meant that the sale and the corresponding value of the Timeshare were at the will of a connected party (the timeshare Seller/Developer) who might be in control of the club. The value of the Timeshare is under the control of the Seller/Developer who is linked to the finance house/bank.

Why did the lender not present an expert witness to professionally state, that the timeshare had value when sold? Did the product have a value? If not, then how could the timeshare product be sold for £20,000 when it was worthless (seem to be a good question)?

The lenders in the past have loaned many billions to consumers. As part of due diligence, they would have inspected the contractual terms [which underpin the timeshare products being sold]. Knowing that lender would have to repossess timeshare from time to time, they would [as a natural process] want some security i.e. the acquired timeshare. Quite suppressing they don’t!

If a house is sold, a buyer may need funds from a mortgagor. The lenders do take a charge on the property acquired, and maintain that charge until the loan is paid off. In Timeshare the consumers acquire the interest in a property, however, no charge is taken by any lender.

The seller by way of contractual terms does permit foreclose on the Timeshare property for such things as for late payments of maintenance fees and many other non-financial matters.

As the sellers/developers do incorporated terms within the contract, that contract must have been accepted by the lender as fair. The lender (by association) does give the timeshare resort some credibility.

In this case, the lender did know they were lending on a timeshare product, which must have retained a value. The court in considering that value was surprising that the lender did not provide the court with a valuation of the timeshare asset.

The value not being available the court so determined that an “unfair relationship” did exist.

Clearly, if the lender was permitted to take the Timeshare into their care, they would have sold it to pay off part or all of the debt of Mr Wilson. They chose not to and chose not to present any value to the court.

Did the lender believe that the Timeshare held a value? If they did, they could have taken a charge and could have sold it to pay off the consumers debt.

It can, therefore, be put to the lenders that as they take no interest in the Timeshare, do they believe it is the worthless product, retains no value and any recovery just increases costs. If that submission is correct they loaned money knowing that the acquisition was worthless and a worthless product was being sold to their potential clients.

As they would have seen the contract, discussed finance with the Timeshare resort and had knowledge that in past transactions value was never retained, it has to be put to the lender “why are you lending money in support of a worthless product, for financial reward”. Does an “unfair relationship exist”?

The court says it does.

Posted on: 22nd February 2016