We just learned that Holiday Inn Club Vacations agreed to take back 1,300 intervals from owners. How did this come about and what does it mean for other timeshare owners?
It is true. In a remarkable resolution of the company's lawsuit against a major exit company, Holiday Inn Club Vacations (HICV) agreed in January to take back an estimated 1,300 intervals from Orange Lake Country Club owners who had hired Timeshare Exit Team to help them get out of timeshare contracts. Timeshare Exit Team, meanwhile, agreed to stop taking new HICV customers and pay some unspecified damages or court costs. The ramifications of this unprecedented legal settlement should reverberate throughout the timeshare world, because it marks the first time that a major developer has agreed to take back intervals rather than risk pursuing a lawsuit in federal court.
Background on the Lawsuit
HICV sued Timeshare Exit Team in 2017, alleging that the Washington-based company had interfered with customer contracts and misled owners about its ability to get them out of timeshares. After several pretrial hearings, the case was scheduled for jury selection in Orlando in early January. Orange Lake Country Club, also based in Orlando, is the flagship resort for HICV.
On the eve of trial, both companies agreed to settle the case without adjudicating any of the remaining legal issues raised by HICV against Timeshare Exit Team. They also agreed NOT to impose a confidentiality clause that prohibits disclosure of the settlement. According to timeshare lawyers contacted by RedWeek, this is the first time that a settlement of this kind has not been covered by a blanket confidentiality clause.
Adding to this litany of firsts, both companies issued press releases afterwards that touted the settlement as a major victory for their respective customers. The headlines pretty much tell the story of each company's positioning.
Both Firms Vow to Keep Fighting to "Protect" Their Customers
On Jan. 15, Timeshare Exit Team sent a press release to all major wire services that declared: "Orange Lake Takes Back Nearly 1,300 Timeshares from Frustrated Owners in Landmark Settlement with Timeshare Exit Team." The subhead added: "Timeshare Owners will not have to Represent Hardships or Answer Questions in New Settlement on Expedited Exit Process."
Five days later, Jan. 20, HICV responded with its own victory statement: "Holiday Inn Club Vacations Incorporated Secures Major Win and Exposes Timeshare Exit Team for its False, Misleading and Deceptive Practices." The subhead reads: "Successful legal action removes Timeshare Exit Team's harmful tactics with owners and allows Holiday Inn Club Vacations to continue offering no-fee timeshare relief options to owners."
HICV Declares Significant Victory While Minimizing Takebacks
Both companies acknowledged the settlement, but not much else. HICV did not mention that it would take back intervals from Timeshare Exit Team customers. (HICV told RedWeek that the exact number of takebacks will be determined later, after Timeshare Exit Team provides HICV with a list of impacted owners. The takeback process may take months to complete.)
Instead of highlighting takebacks, HICV said in its announcement that owners should take advantage of its "safe, legal and free" exit program, known as Horizons.
"We are vigorously fighting to educate owners and protect their financial wellbeing from the pitfalls of working with unscrupulous exit companies that demand thousands of dollars upfront and cause long-lasting credit damage," said HICV President and CEO Tom Nelson. "The most productive (exit) solution for timeshare owners is to work directly with their developer instead of hiring companies who use deceptive advertising with paid influencers to mislead consumers with money-back guarantees that they never receive. This court settlement holds Timeshare Exit Team financially accountable to Holiday Inn Club Vacations and protects our customers."
HICV Touts Industry's Responsible Exit Initiative as Best Alternative for Owners Who Need to Get Out
The bulk of HICV's statement warns owners about the potential perils of working with third-party exit companies and promotes the industry's 2018 initiative, know as Responsible Exit, to help owners who need or want to terminate timeshare contracts. Responsible Exit is a voluntary program, backed by many major developers, that was launched to offset the rise of exit companies — including many scammers — that typically charge several thousand dollars upfront to negotiate exits. In addition to suing individual exit firms and urging regulators to crack down on fraudulent exit companies, developers have declared all-out war on the exit industry. Nelson, the HICV CEO, said in his press release that 19 additional legal cases are pending against third-party exit firms and their attorneys. Nelson is also the chief spokesman for the industry's ongoing PR campaign to improve its public image and combat criticisms from consumer advocates.
The industry's legal assault against exit companies has driven several smaller firms out of business. But litigation appears to be just a cost-of-doing-business for the major exit firms. Timeshare Exit Team, which claims have helped more than 20,000 owners terminate contracts since 2012, says it plans to keep helping owners who feel trapped and financially overburdened by their timeshares.
Timeshare Exit Team Says It "Will Not Stop"
"This is a major win for consumers, who can now rest a little easier thanks to this settlement," said Timeshare Exit Team Founder and CEO Brandon Reed. "Developers have put consumers through years of stress due to purchases that owners often go on to regret. We're going to continue to fight on behalf of these consumers and will not stop until the industry changes."
Reed says his company provides legal and legitimate services to owners who cannot find relief from their developer or HOA. He makes no apologies for charging upfront fees. He also points out that many of his customers owe mortgages that make them ineligible for programs like HICV's Horizons program. As a former timeshare owner who turned his own negative personal experience into a business, Reed also blames developers for creating the cottage-industry exit business in the first place. Exit companies fill a gap in the timeshare universe, he says, to resolve owner issues that developers deliberately refused to address, such as the exit needs of an aging owner base.
Reed's company is one of the most prolific radio and Internet advertisers in the exit industry, spending millions every year to attract clients. As a result, he and his company are top targets for developers who are extremely sensitive to criticisms about high pressure sales practices and inadequate exit programs. Reed is also the Founder and primary funder of the Coalition to Reform Timeshare, a nonprofit launched in 2019 to advocate consumer reforms, including a Bill of Rights for owners and potential buyers. The Coalition contends that buyers should get a 24-hour cooling-off period prior to purchase; that developers should disclose the market value of a timeshare at time of purchase; and that the industry should adopt a strict code of ethics that includes, among other things, a ban on high-pressure and misleading sales pitches.
Setting Precedent for Future Lawsuits?
As mentioned previously, HICV's agreement to take back 1,300 intervals from Orange Lake owners is a symbolic first for the industry. Legal experts say that the expense of trial, coupled with the unknowns of a jury verdict, drove both sides to settle. Those 1,300 intervals represent an infinitesimal percentage of HICV's 365,000 owner network and a small slice of Timeshare Exit Team's customers. So, from a number's standpoint, the settlement was survivable for both companies.
The impact of the settlement on other cases will be determined over time. Timeshare legal experts are split. Some say the HICV settlement could become a model framework for developers to resolve disputes with other exit companies. Others say this settlement only fits HICV and caution against using it as a yardstick to evaluate other cases.
Of course, there are other alternatives for owners who no longer wish to own. RedWeek.com has built a large network of owners who trust the platform to rent or sell their timeshares. The company focuses on helping owners monetize their asset if they can no longer use it, rather than simply surrendering it. For those unable to sell, RedWeek recommends owners contact their HOA to see if they offer resale or buyback programs.
Why This Settlement Is Important for Timeshare Owners
At a minimum, the settlement serves as an open invitation for HICV owners to apply for the company's Horizons exit program. It also prompts other developers to offer similar exit options. However, not all owners will qualify. Typically, owners must be in good standing, paid up on all fees, and have no mortgages. Those with mortgages may still have to hire outside help to figure out how to move forward.
On the other hand, the settlement gives Timeshare Exit Team a green light to continue signing up new customers from other companies without any stigma from the HICV lawsuit. According to court records, the company still faces lawsuits, alleging similar contract-interference claims from Diamond Resorts, Wyndham Destinations, and Westgate Resorts, three of the largest timeshare chains in the world.
What do you think about this case? Do you think the settlement was a fair solution for both sides?
