In the current pandemic, new timeshare exit companies keep popping up. This is due to the influx of timeshare owners who are looking for a way out of their timeshare agreement. It is increasingly hard to gauge whether some of these companies are well-meaning. The timeshare exit industry is also riddled with falsifications.
It’s important to keep an eye out for red flags in timeshare exit companies.
It is so difficult to find a great timeshare exit company and avoid being scammed. In this article, we will be addressing some of the glaring warning signs to be wary of in your search.
The “100% Money-Back Guarantee” Timeshare Exit
The money-back guarantee is something we discuss very often in our articles. The reason we mention the money-back guarantee often is because it is the most common scam tactic used by fraudulent timeshare exit companies.
Unfortunately, it is also one of the most common marketing ploys used by these same companies.
New, and thus unrated, timeshare exit companies make a big promise by claiming their clients will get their money back if they are unsatisfied. However, this promise makes it easy for fraudulent companies to gain a lot of trust from desperate customers. When big promises are made by representatives, customers tend to trust blindly regardless of a company’s lack of expertise or business practices.
The timeshare exit industry has changed pretty dramatically over the past few years. Timeshare exit has never been cheap, quick, or easy. When you combine that with the fraudulent companies trying to take advantage of those looking to get rid of their timeshares, it is a recipe for disaster.
A money-back guarantee does not determine the quality of service. Clients are paying for a timeshare exit, not a guarantee that when the exit fails, they will get their money back.
Many of these companies also market their money-back guarantee alongside a promised time frame, which will grow their businesses very quickly. Fraudulent companies tend to take high upfront payments from clients and then fail to complete the service. Most of the time, these companies end up filing for bankruptcy.
That exact scenario happened with two timeshare exit companies recently, Resort Release and American Consumer Credit. Both of these fraudulent companies had thousands of clients that were left out of thousands of dollars and still burdened with their unwanted timeshares.
Unauthorized Law Practice in Timeshare Exit
Any consideration of transfer or stopping payments on your timeshare should only be done with the assistance of an attorney. A timeshare contract is a legally binding document, and your ownership cannot be cancelled by any third-party company that does not employ attorneys.
It’s a huge red flag when timeshare exit companies tell you to stop paying your mortgage, maintenance fees, or any other expenses associated with your timeshare.
Any legal advice you obtain through the timeshare exit process should be from a licensed attorney who is representing you.
If a licensed attorney does suggest stopping your payments, you need to get that in writing. It’s also crucial that the aforementioned attorney explains the potential risks to that strategy, and not just the benefits.
More often than not, failing to pay any timeshare fees will result in efforts to collect by your resort. Some resorts also charge interest and other penalties on what you owe.
When you stop making your payments, not only will you receive a ton of unwanted calls and letters from collection agencies, your credit could also be damaged for years to come.
In a worst case scenario, the resort may put a lien on your personal property. Eventually, the resort will foreclose your timeshare, and this will severely damage your credit.
A big red flag is when a timeshare exit company withholds details regarding their process.
A lot of the time, these companies will claim they have a “proprietary process” and that they cannot reveal their exit strategy. Any good timeshare exit company would be willing to have an open line of communication with their clients before and throughout the process. It raises a lot of suspicions when a company refuses to disclose their tactics.
While exiting a timeshare does require a lot of knowledge regarding law and the industry, it does not involve any “trade secrets” that need to be kept from the general public.
Without transparency, the timeshare exit company can engage in unlawful behaviors to complete a timeshare exit. Oftentimes, companies that withhold information consider a timeshare going into foreclosure to be a valid timeshare exit.
These types of companies rarely ever put their customers first, and they do not have your best interest at heart – either financially or legally.
Timeshare ownership is a legally binding agreement. It does not make a lot of sense to work with a timeshare exit company that doesn’t bother to employ attorneys. It seems logical that negotiation regarding a contract should be done by an expert in law.
Timeshare exit companies that employ attorneys are eager to flaunt it. Based on that, it’s clear to us that the companies that claim they have a proprietary process do not employ attorneys.
Again, any decision to stop payments on a timeshare should be discussed with a legal counsel.
Even claims that the company can transfer your timeshare may be fraudulent. We will delve into this more below.
The “Viking Ship” Scam
The concept of this scam is a little less cut and dry.
First, the company will claim they are able to transfer your timeshare and that they have a willing recipient.
However, that “willing recipient” is actually a shell company. To put it simply, a shell company is a fake company. They do not actually have any operations or assets.
A shell company is a cover that was also created for the purpose of fraudulent timeshare exit and after your timeshare is transferred, it will appear as though this fake company is the new owner.
The timeshare exit company will then transfer as many timeshares as possible to this company, without any intention of making payments, of course. All of the maintenance fees, mortgage payments, and any other costs will be charged to a company that, for all intents and purposes, does not exist.
From then, the resort is forced to put the timeshare into foreclosure due to missed payments. You will likely be responsible, and held accountable, for the foreclosure since you were the last valid owner.
The Viking Ship scam became so common that laws were enacted to protect resorts from it. The law states that when this scam occurs, responsibility would be put on you (the timeshare owner).
When the resort discovers the fraudulent transfer, you will be responsible for the payments or foreclosure of your timeshare.
Not to mention, you would be out of thousands of dollars when you take into consideration the hefty payment you made to the fraudulent company.
When companies refuse to be transparent, it’s impossible to know what is going on behind the scenes.
“Donate Your Timeshare” Companies
Timeshare “donation” companies are likely the most dangerous timeshare scam of all.
Not only is donation an illegitimate way to get rid of your timeshare, it could also get you into a lot of trouble with the IRS.
For some context, people used to be allowed to donate their timeshares.
However, since the IRS values timeshares at $0, they do not have value. This is due to the fact that the resale market for timeshares is so poor. The amount an individual would be able to deduct for their timeshare is negligible.
This is a huge part of the reason that people are no longer allowed to donate their timeshares.
Additionally, timeshares are somewhat of a liability. It is unlikely that any charity would be willing to take one off your hands, and this is especially true in the current pandemic, when finances are tight and travel is restricted.
Scams in Timeshare Exit Summarized
The thing to keep in mind is: if a deal seems too good to be true, it probably is.
Remember to beware of unsolicited numbers that call you claiming that they have a potential buyer for your timeshare. Also, unsolicited numbers that call you claiming to be a timeshare exit company should be avoided, as well. Most of the time, these companies will want an answer from you immediately. This is because they don’t want to give you time to reflect on the conversation.
Timeshare exit companies that do not use an escrow payment plan are almost always a scam. Companies that claim their “money-back guarantee” will protect you are almost always scams. You should never pay a high upfront fee for timeshare exit.
Read more about the importance of escrow by clicking here.
Keep in mind that the resale value for timeshares is diminishing, and donation is not a plausible option. Timeshare exit companies that refuse to be transparent about their business practices should be avoided at all costs.
The right choice when picking a timeshare exit company is one that offers an escrow payment plan. Additionally, you should find a company that has great reviews and an established rapport in the industry. A timeshare exit company that employs attorneys and is willing to be transparent is also a good choice.