Purchasing a timeshare interest is an expensive proposition under the very best of circumstances. On top of assessments and maintenance fees, which tend to rise steadily year over year, many consumers take out loans from the resorts themselves to cover the costs of their deeded interests or points. Many of these loan interest rates run from 14% to 18% or higher, all for a product that typically has little to no aftermarket value.
So when resort developers and management companies offer financing and lending solutions to consumers eager to lessen the financial burden of their vacation ownership interest, many leap at the opportunity.
One option that has been drawing scrutiny in the U.S. and the U.K.? What writer Irene Parker calls “credit card lending.” As Parker – herself a timeshare owner, former stockbroker, and frequent contributor to TheStreet – notes, “credit card lending” by resorts “can turn predatory” when it locks consumers into “timeshare presentations that can last for hours” or offers them financing choices that drive them “further into debt with little recourse.”
Recently, Parker took a long look at the intersection of marketing, sales, and lending as they intersect within the timeshare industry. We are thrilled to feature an excerpt of her work below, with the author’s permission.
“Barclaycard and Timeshare in the USA”
There is nothing wrong with travel reward credit cards, but when consumers on vacation get locked into timeshare presentations that can last for hours; credit card lending can turn predatory.
Several banks have come under fire for overzealous sales practices. Wells Fargo and Barclays Bank through Barclays Partner Finance, along with other U.K. banks, have come under regulatory scrutiny and been the subject of lawsuits for a host of reasons, including predatory lending through the use of timeshare developer-sponsored credit cards.
Shawbrook Bank in the U.K. has admitted that it didn’t do its due diligence when approving the finance for vacation ownership products. One of its biggest partners is Diamond Resorts International, a timeshare company that has come under fire for its aggressive sales practices.
Diamond offers a Diamond Resorts Barclaycard Master Card with a 0% promotional six month APR if used for a Diamond Vacation Ownership interest down payment, along with Diamond Resorts International reward points for other purchases. After that, it is a variable APR of 15.24%, 19.24% or 22.24% depending on creditworthiness.
Diamond Resorts International’s primary business segments are hospitality and management services and vacation ownership interest, or vacation points sales, and financing.
It is the financing component that often makes people with vacation brain sign a contract on impulse for perpetuity, not even having used the vacation service at the time of purchase. The decision is often based on how well the buyer likes the resort if they aren’t an existing owner. In other words, they may not use the booking program until the next vacation.
The Diamond Resorts International Barclaycard ranked 15th of 16 travel-related credit cards offered by Barclays, according to a 2015 Frugal Travel Guy ranking. Of the 16, three are timeshare credit cards, and Wyndham Worldwide credit cards ranked fourth and sixth on the list.
Timeshare lending is commonplace in the U.K. as well.
“In order to finance the purchase of a timeshare product, the vacationer is asked to enter into a loan agreement with Barclays Partner Finance. Attendees leave a sales meeting with either points or timeshare weeks entering into an agreement with Clydesdale Financial Services Limited trading as Barclays Partner Finance,” according to blog Inside Timeshare.
One of the reasons that U.K. banks ran into trouble was because of urging people to take out “home improvement loans.” “Pre-arranged lending is arranged through Barclays Partner Finance,” according to Inside Timeshare.
The Consumer Financial Protection Bureau is investigating timeshare company Westgate Resorts. Westgate Resorts challenged the CFPB on jurisdiction, saying that the bureau is overreaching because sales and marketing aren’t part of the lending process. The CFPB denied the petition…
We are a charge-it society. But there is no vacation in the world worth taking at 18% interest.
As Tom Tubbs, a LTRBA member from Island Consulting Realty in Sarasota, Fla., said, “More than a few calls to our office begin with, ‘My parents got roped into this timeshare.'”
Our thanks to Irene for reaching out about this fascinating story! For more – including a case study of one family’s increasingly fraught journey to pay down their timeshare loans – we encourage you to read her full article at the Inside Timeshare blog.