A tough regulation adopted in May 2002 by the Alberta government to protect consumers against the robust, uninhibited business practices of some travel clubs is about to be put to work in a provincial court in the Rocky Mountain town of Canmore.
On August 26, Alberta Government Services (AGS) announced that Royal Club International (A World of Timeless Vacations); Resort Condominiums International LLC; RCI Canada Inc.; Royal Club Resorts Inc.; and Andre Muran, director of Royal Club Resorts Inc., face 125 charges under the Fair Trading Act.
The five parties, who are to make their first court appearance on October 13, are accused of operating without a travel club licence, misleading consumers and refusing to provide refunds when customers attempted to cancel their contracts.
A travel club is an enterprise that claims to provide its members access to discounts or other benefits on the future purchase of transportation, accommodation or other travel services.
The genesis of Alberta’s controversial travel club scene dates back six years when time-share marketers who fled the inhospitable regulatory environment of British Columbia established themselves in Alberta, only to be hit by the Time Share Contracts Regulation that came into being when the province passed its Fair Trading Act in 1999.
This law gives buyers a seven-day cooling-off period, not exactly catnip to a business that includes some ethically challenged types who have spent vast sums of money to lure potential customers into their salesrooms and subjected them to diabolically sophisticated, high-pressure sales tactics.
To circumvent this deal-killer, some marketers hatched a different kind of legal instrument. They began selling vacation club certificates, a distant cousin to the time share. These memberships supposedly were tickets to fabulous travel deals. Et voilà! Thousands of complaints of misrepresentation and high-pressure sales tactics rolled in to AGS’s offices.
The regulators realized the marketers had found a loophole. With very few exceptions (such as the time-share business), cooling-off periods apply only when the deal is consummated at a location other than the seller’s place of business (i.e., at the customer’s home or office). These customers had signed their contracts at the companies’ premises. The government could not help them get out of their contracts.
AGS investigators spent 18 months investigating one of these companies, Snowbird Vacations International, but concluded in August 2001 that there was insufficient evidence for a prosecution.
Instead, the department launched a marketplace consultation in which stakeholders were canvassed about broadening the scope of direct sales cancellation to include travel clubs. This led to the implementation in May 2002 of the Travel Clubs Regulation.
Some marketers packed their bags and moved to more hospitable climes. “That’s fine with us,” Rob Phillips of Edmonton, AGS’s director of consumer programs, told Business Edge. “They were the source of a lot of our problems.
“I understand they are still causing a lot of problems in Ontario and other places.”
Alberta’s Travel Clubs Regulation allows purchasers a 10-day cooling-off period (compared with the seven-day period for time-share contracts), during which they can cancel contracts without giving a reason. The clock does not start ticking until they receive a copy of the signed contract.
In addition, the regulation requires travel club businesses to obtain a provincial licence and post a $150,000 “security” to cover any claims. It sets a five-year limit on the length of travel club contracts, effectively banning lifetime contracts. (B.C. sets the limit at two years.)
It gives customers the right to cancel their contracts if the business closes its doors or substantially changes its operation.
And it contains a code of conduct that requires these businesses to identify themselves to prospective customers as a travel club, disclose that their goal is to enter into a contract and to use a size of print that would not require the use of an electron microscope.
Some in the travel club business could not have done more to provoke the introduction of the new regulations in 2002.
The department logged several thousand time-share and travel-club complaints over a one-year period, compared with about 200 complaints over the previous year.
Some telemarketers inveigled consumers into coming to their offices through the lure of “prizes” such as cameras or vacations, while saying as little as possible about their true intent.
They used tag-team sales approaches, splitting couples up (knowing that couples are more sales resistant when they are together) and then routing the individuals through a succession of sales reps who played different roles, such as the “closer.”
One company plied its prospects with wine. Another hustled recalcitrant consumers to a back door that led to an alley.
It mattered little if these consumers were elderly and too sick to travel.
To add insult to injury, members often found themselves unable to book vacations or, when they succeeded in doing so, not enjoying the savings they had been led to expect.
AGS’s Phillips said complainants told his department they would wake up the next morning, immediately regret what they had signed and wonder whatever possessed them to do so.
AGS launched its Royal Club investigation after several consumers complained they did not receive refunds.
Time-share and travel-club operators are required to issue refunds within 15 days when customers cancel, and these cancellation rights are extended to one year if the supplier was operating an unlicensed club.
Alberta had about six travel clubs in 2000. Today, only two licensed companies remain.
(Brock Ketcham can be reached at brock@businessedge.ca)
