ob体育 has commenced civil penalty proceedings against Ultiqa Lifestyle Promotions Ltd (Ultiqa) for failing to ensure that financial advice to consumers to buy timeshare products was in the consumers鈥� best interests.
ob体育 alleges the advice was provided by financial advisers who were authorised representatives of Ultiqa from October 2017 to March 2019. Ultiqa promoted a timeshare scheme called the Ultiqa Lifestyle Scheme.
ob体育鈥檚 case is that Ultiqa鈥檚 authorised representatives did not act in their clients' best interests and did not give appropriate advice based on clients鈥� circumstances. ob体育 claims that some consumers had not sought advice regarding a timeshare scheme and some were not aware they were receiving financial advice.
During ob体育鈥檚 investigation, consumers reported to ob体育 that upfront costs of joining the timeshare scheme were approximately $10,000 to $25,000, with ongoing fees of up to $800 per year. Some consumers complained to ob体育 that they had difficulty booking holidays due to lack of availability.
ob体育 Deputy Chair Karen Chester said, 鈥楾imeshare schemes are complex financial products. They can be difficult to understand and compare with other products, and involve long-term financial commitments.聽 Consumer harm can and has resulted when consumers are not aware of the up-front costs, ongoing fees or the nature of their investment - like how easy (or not) it is to exit.
鈥楾his is the first time ob体育 has taken action against a timeshare provider in relation to financial product advice practices. The timeshare industry is on notice to ensure existing compliance and advice practices comply at all times with the obligations on all financial advisers, especially for that advice to be in the consumers鈥� best interests,鈥� concluded Deputy Chair Chester.
ob体育 further alleges that Ultiqa did not:
- provide relevant training to its authorised representatives
- monitor and supervise its authorised representatives appropriately, and
- have documented policies and procedures in place to support the advice process.
ob体育 also alleges Ultiqa鈥檚 conduct amounted to a breach of its obligations as an Australian financial services licensee to act efficiently, honestly and fairly.
ob体育 is seeking declarations, pecuniary penalties and other orders to be made by the Court.
Ultiqa ceased selling interests in the Scheme on 28 January 2020 and was placed into members' voluntary liquidation on 30 April 2021. The Scheme remains active, as does the balance of the Ultiqa Group entities. Ultiqa currently holds an AFS licence.
The date for the first case management hearing is yet to be scheduled by the Court.
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Background
Timeshare schemes are managed investment schemes and financial products that commonly involve property in the form of holiday accommodation. They are complex products that typically involve high upfront fees and ongoing annual costs.
Timeshare financial advisers typically sell timeshare 鈥榤emberships鈥� by providing personal product advice to consumers and can use persuasive sales tactics. In many cases, consumers do not recognise they have received financial advice, which presents a significant risk, as consumers are not aware of the financial commitment of the product and whether it is suitable for them. ob体育鈥檚 Report 642 Timeshare: Consumers鈥� experiences聽showed a high-level of discontent amongst timeshare participants.
Report 642 looked at consumer experiences with timeshare following consumer research conducted in 2019.聽聽
It also indicated that many research participants were dissatisfied with their timeshare membership and that timeshare memberships contain significant risks, including:
- the long-term nature of contracts, which typically range from 20 to 99 years
- the high upfront costs of joining which average $23,000
- the ongoing annual costs of membership which average $800
- the fact that many consumers often need to borrow to make the membership purchase, with 48% of consumers taking out a loan to buy a membership
- the high cost of loans taken to purchase membership, with an average loan cost of $19,699 and an average interest rate of 13.51%
- the fact that timeshare memberships are often difficult to exit.
The Scheme is one of approximately 15 registered timeshare schemes currently operating in Australia. Up until January 2020, it was one of approximately five schemes issuing interests to new members. Data provided to ob体育 by the Australian Timeshare and Holiday Ownership Council indicated that there are currently approximately 180,000 timeshare members in Australia.
ob体育 previously fined an Ultiqa Lifestyle timeshare lender for responsible lending failures in 2018 (18-253MR) and raised concerns with Ultiqa Lifestyle's disclosure and sales practices in 2016 ().
ob体育鈥檚 Moneysmart explains what to look out for when .
Editor's note:
The first case management hearing has been set down for 12 November 2021.
Editor's note 2:
The first case Management hearing scheduled for 12 November 2021 has been vacated. The Court made orders in chambers granting ob体育 leave to proceed against Ultiqa in liquidation. The matter will be set down for trial in the Federal Court on a date to be fixed.
Editor's note 3:
The matter has been set down for trial in the Federal Court on 2 March 2022.
Editor's note 4:
The trial was rescheduled from 2 March 2022 to 4 March 2022. On 4 March 2022, the trial against Ultiqa Lifestyle Promotions Ltd was heard before Her Honour Justice Downes. The Court has reserved its judgement.