Time-sharing schemes: Update on the status of our review of the policy settings
Following our public consultation under Consultation Paper 272 Remaking ASIC class orders on time-sharing schemes (CP 272) and further consultation with respondents, we are now in the process of implementing our changes to the policy settings for regulating time-sharing schemes.
We have outlined a summary of the key policy changes below.
The aim of the changes is to:
- strengthen the protections for consumers
- tailor the current requirements to reflect the nature of time-sharing schemes (where appropriate).
In particular, we are seeking to help consumers better understand the product, and to highlight to industry our expectations for compliance with their obligations when offering the product.
To measure the effect of these changes, we will be collecting targeted data from operators of time-sharing schemes and increasing our monitoring of the industry.
We anticipate that we will provide further information on the rationale for our policy changes in the course of our work.
We have outlined a summary of the key changes we will make to the current policy settings below.
To give consumers additional time and expanded methods to exercise their cooling-off rights (including where finance is sought), we will:
- extend the cooling-off period for consumers to:
- 14 days when they buy interests in time-sharing schemes operated by members of the Australian Timeshare Holiday Ownership Council (ATHOC)
- 21 days when they buy interests in time-sharing schemes operated by non-ATHOC members
- update the Pro Forma 208 Time-sharing schemes: Cooling-off statement (PF 208) to highlight key information and enable consumers to exercise their cooling-off rights by expanded methods
- require applications for interests in a scheme that involve an application for finance to be 'subject to finance' (i.e. voided where finance is not approved or the consumer elects to not proceed with the finance application)
- require operators of time-sharing schemes to refund all money paid for an interest and financing if the consumer exercises their cooling-off rights or finance does not proceed.
To give consumers additional information about the fees and costs and key features of time-sharing schemes, we will:
- introduce a tailored fees and costs disclosure regime, similar to the one we outlined in CP 272
- require operators to give consumers an explanation of key matters before they commit to buying interests in the scheme
- require operators to include a prominent consumer warning and summary of the key features of the scheme in the Product Disclosure Statement (PDS). The key features that must be summarised include:
- the consumer's cooling-off rights
- the term of the interest in the scheme
- the fees and costs
- any criteria that the operator considers consumers should meet when they are deciding to buy interests in the scheme.
Exiting the scheme
To help members experiencing hardship, we will impose a requirement that members must not pay any shortfall or further payments after they forfeit their interests in hardship circumstances.
Modifying ongoing obligations
To reflect the nature of time-sharing schemes, we will:
- require operators of points-based schemes to audit the points annually
- require licensees that deal in interests in time-sharing schemes, and associates of licensees, to comply with specific licensee obligations imposed on operators of time-sharing schemes (such as cooling-off rights)
- tailor some existing obligations based on feedback from industry, including:
- expanding the definition of 'special custody assets' under Class Order [CO 13/760] Financial requirements for responsible entities and operators of investor directed portfolio services to include certain time-sharing assets
- reducing the requirement to audit the trust account from twice a year to once a year.
Other steps arising following consultation
To ensure operators and their associates are aware of their obligations when running time-sharing schemes, we will amend Regulatory Guide 160 Time-sharing schemes (RG 160) to include additional guidance to industry on:
- existing consumer protection provisions (including the hawking prohibition)
- providing financial advice (including satisfying the best interest duty)
- their responsible lending obligations.
We will also be collecting targeted data from operators, to measure the effect of the policy changes, and undertaking increased monitoring of the industry. Following this, we will review whether any further changes to our policy (including for particular operators) are required.
Timing for implementation
We are currently preparing the changes to RG 160, the instruments providing relief for time-sharing schemes, PF 208 and web content.
We are also undertaking the Office of Best Practice Regulation (OBPR) requirements for introducing changes to policy, including preparing a Regulation Impact Statement.
We are continuing to progress our work and we will release the changes to the policy settings as soon as possible. We intend to have a transition period of six months from release for any new obligations.