The Federal Court has made declarations that timeshare company Ultiqa Lifestyle Promotions Ltd breached financial services laws by failing to ensure that financial advice given to consumers was in the consumers’ best interests.
Between October 2017 and March 2019, financial advisers acting as authorised representatives of Ultiqa advised consumers to invest in the Ultiqa Lifestyle Scheme, a timeshare scheme, despite such advice not being in the consumers’ best interests and not being appropriate to their circumstances.
Consumers reported the upfront cost of joining the Scheme was between $10,000 to $25,000 with ongoing annual fees of up to $800. Most consumers who bought into the timeshare scheme took out a loan with a company related to Ultiqa to pay for their timeshare interest
ASIC Deputy Chair Karen Chester said, ‘This is an important decision for consumers and ASIC’s first financial advice action against a timeshare provider. Timeshare schemes are complex financial products. They can be difficult to understand and compare. They involve significant long term financial commitments of tens of thousands of dollars, are often loan-financed, and can be difficult to exit. When sold alongside financial advice, it is fundamental – and legally required – that the advice is in the consumer’s best interest and appropriate to their circumstances.’
In handing down her decision, Justice Downes found that Ultiqa’s authorised representatives prioritised sales objectives and targets over their clients’ best interests, saying, ‘That they gave such priority also manifested by the authorised representatives engaging in tactics to pressure the consumers to sign up at the presentation, including (in one instance) preventing the consumer from obtaining external advice, (in two instances) misleading the consumers by representing that the interest in the Scheme was not a time-share scheme, in generally not giving the consumers sufficient privacy and time to discuss and debate the proposed acquisition of interests in the Scheme, and by offering inducements to the consumers to sign up at the presentation. That they were required by Ultiqa to give such priority is apparent from the content of the documentation provided by Ultiqa […] The focus in giving the advice was on making a sale, and not on acting in the consumer’s interests. ‘
Justice Downes’ decision also quoted a sales manual provided to Ultiqa’s authorised representatives that said, ‘Once your client is on the Sales Deck they come to the grim realization that this is a sales environment and what is going through their mind is “How can we get out of here?”, and, if you give them the chance, they will. DO NOT GIVE THEM THE CHANCE! Do everything you can do to amuse, interest, excite, relax, humour, flatter and if necessary cajole your clients into staying.’
Deputy Chair Chester said, ‘Ultiqa prioritised sales over appropriate advice and ultimately consumers’ best interests. Pressure sales tactics used, and even documented in their sales manuals, encouraged sales agents to “corner” consumers into investing in a timeshare scheme that many could not afford. Despite paying tens of thousands of dollars in upfront costs and ongoing fees, many could not even book holidays in their timeshares due to lack of availability – meaning they got nothing for their money.’
The Court declared that Ultiqa failed to:
- act efficiently, honestly and fairly;
- provide relevant training to its authorised representatives;
- monitor and supervise its authorised representatives appropriately; and
- put in place documented policies and procedures to support the advice process
Ultiqa ceased promoting the sale of interests in the Ultiqa Lifestyle Scheme on 28 January 2020 and was placed into members’ voluntary liquidation on 30 April 2021. The Scheme remains active and Ultiqa currently holds an AFS licence, which allows consumers to access dispute resolution services through the Australian Financial Complaints Authority.
The matter will return to Court for a case management hearing on 27 May 2022.
