Florida Law Targets Resale Fraud

From TimeSharing Today, November 2011

Florida's Attorney General Pam Bondi has unveiled a legislative initiative designed to protect consumers from timeshare resale fraud, the number one complaint that the Attorney General's Office has received for the past two years. The bill strengthens existing laws by addressing unfair and deceptive marketing and advertising practices by timeshare resale companies that are not licensed real estate brokers. From January 2011 to the end of September, the Attorney General's Office has received nearly 7,000 complaints. In 2010, the Attorney General's Office received more than 12,000 complaints about timeshare resale fraud - more than the next four highest complaint categories combined.

"Florida is home to millions of timeshare periods that consumers purchase. We cannot allow unscrupulous individuals to mislead and defraud our consumers, many of whom have invested their life savings into a dream vacation home," stated Attorney General Pam Bondi.

The most common complaints include: false claims that a specific buyer is ready to buy or rent the property once the consumer signs a contract; deceptive claims that property will sell or rent within a certain time; failure to honor stated-cancellation policies, including refunds of fees; and misrepresentations of the actual services provided to consumers.

The proposed legislation includes the following provisions:

• A timeshare resale advertiser may not misrepresent to an owner that a potential buyer exists.
• A timeshare resale advertiser may not mislead a customer as to the success rate of the advertiser's sales.
• A timeshare resale advertiser may not provide brokerage or direct sale services.
• A timeshare resale advertiser must honor a cancellation request made within 7 days following a signed agreement.
• A timeshare resale advertiser must provide a full refund by a timeshare owner within 20 days of a valid cancellation request.
• A timeshare resale advertiser must not collect any payment or engage in any resale advertising activities until the timeshare owner delivers a signed written agreement for the services.
• A timeshare resale advertiser must also provide a full disclosure statement printed in bold type, with no smaller than a 12-point font, and printed immediately preceding the space provided for the timeshare owner's signature.
• A timeshare advertising agreement must be put in writing.
• A company who violates these provisions has committed a violation of the Unfair and Deceptive Trade Practices Act with a penalty not to exceed $15,000 per violation.

According to Bondi's office, many companies are cold-calling timeshare owners with promises that they have buyers ready to purchase their property if the owner is ready to pay an up-front fee that could be thousands of dollars. Then, the buyer never materializes, or the resale company won't honor a cancellation policy. Numerous instances of these scams have been described over the past year in TimeSharing Today's "Spotlight on Scams."

The American Resort Development Association (ARDA) has been pushing model legislation similar to Florida's. Jason Gamel, a lobbyist for the association, attended Bondi's press conference, pledging the group's support and resources. "We also hope other states will follow the general's lead and enact similar legislation," he said.

The move also won quick support from AARP's Florida lobbyist Jack McRay who said the legislation would specifically protect seniors who might be susceptible to the calls. When ARDA's model act was announced last year, it was immediately denounced by licensed brokers. In an editorial written at that time by Judi Kozlowski and Tom Tubbs, officers of the newly-formed Licensed Timeshare Resale Brokers Association (LTRBA), they stated:

"Currently there are plenty of laws on the books to deal with the problems of up-front fee agencies who promise everything and deliver nothing. Enforcement is all that is needed. New laws will not matter to the con artists of our business. That's why they're con artists. But placing new laws and regulations upon licensed brokers, who are already governed by their state real estate commissions, places an undue amount of new regulations and paperwork on the very companies that are working hard and honestly in the resale community."

Tubbs and Koslowski stated that the LTRBA was formed in part because the licensed brokers "want to take back the resale end of timeshares that has gotten the reputation of being run by crooks." They urged ARDA to remove licensed resale brokers from many of the regulatory provisions of the model act.

A copy of the proposed legislation was not available at press time and will not be made available until it is introduced by the sponsors, so it is unclear whether licensed real estate brokers would be exempted from the requirements of the Florida law.

Some critics have suggested that the Attorney General's focus on timeshare resale fraud was influenced by the substantial donations made by ARDA to the Republican Party of Florida, which was the top contributor to Bondi's election campaign in 2010.

ARDA lobbyist Gamel dismissed this suggestion, pointing out that timeshare resale fraud was the subject of the most complaints over the last few years.

However, others pointed out that Attorney General Bondi is paying less attention to more high-profile and wide-reaching issues such as mortgage fraud, foreclosure mills, pill mills and Medicare fraud. Critics also cite as anticonsumer her opposition to including reductions of mortgage loan balances as part of a 50-state settlement with major banks over illegal foreclosure practices.

The Attorney General's office was subjected to criticism from consumer advocates when two vocal foreclosure fraud investigators in her office were forced to resign and several former employees left the office for jobs with foreclosure firms then under investigation.