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(REDWOOD CITY) – Attorney General Bill Lockyer today announced the settlement of a major consumer protection lawsuit against Trendwest Resorts, the world's third largest timeshare operator, which requires the firm to pay consumer restitution and civil penalties, and reform its business practices.
"Trendwest misled consumers through deceptive sales practices and non-disclosure, and illegally denied consumers the ability to cancel their contracts," said Lockyer. "This settlement will help make victims whole, and ensure Trendwest operates lawfully in the future."
Approved by San Mateo County Superior Court Presiding Judge Mark Forcum, the settlement was filed today with that court, along with the complaint. The settlement resolves a case in which the Attorney General's Office, San Mateo County District Attorney James P. Fox and the state Department of Real Estate (DRE) worked together for more than one year to investigate a large number of consumer complaints.
Under the settlement, Trendwest will pay restitution to consumers who purchased timeshare contracts since March 31, 2001 and who requested cancellation within 45 days of executing the contract. Trendwest also must provide restitution to consumers who signed up for the firm's Explorer Program and have yet to exercise their rights under that contract. Total restitution to consumers could top $2 million.
Additionally, Trendwest must pay $795,000 in civil penalties – $625,000 to the state and $170,000 to San Mateo County. To cover attorneys fees and investigative costs, Trendwest will pay $625,000 to the Attorney General's Office, $55,000 to the San Mateo County District Attorney's Office and $225,000 to DRE. Finally, over the next four years, the company will fund DRE's audits of Trendwest to determine its compliance with the settlement.
The DRE has estimated the restitution, penalties and reimbursement for fees and costs could bring the settlement's total value to about $4.3 million. Prosecutors say, to their knowledge, this the largest settlement of a consumer protection lawsuit filed by a law enforcement agency against a timeshare operator.
Trendwest is a subsidiary of Cendant Corporation, and develops and operates 48 timeshare properties located primarily in the western United States, British Columbia, Mexico, Hawaii and the South Pacific. Trendwest sells its timeshare interests through direct marketing in which the firm offers consumers gifts and incentives to attend sales presentations.
The majority of Trendwest's marketing revolved around timeshare use credits, which the company normally sold for between $14,000 and $25,000 and for which Trendwest provided financing. Trendwest also sold a "trial" product, good for about one year, for $595.
The complaint alleged Trendwest engaged in deceptive marketing and sales practices, and misrepresented its timeshare products. Additionally, the firm violated cancellation notice requirements and unlawfully failed to accept cancellation requests, according to the complaint. Trendwest also violated the law in its telemarketing practices by using automatic dialing devices and failing to honor consumers' "do not call" requests, the complaint alleged. Other violations, according to the complaint, included selling products not covered by its DRE permit and noncompliance with laws governing prizes and incentives.
To protect consumers against future misconduct, the settlement includes numerous "injunctive relief" provisions that require Trendwest to reform the way it does business. Trendwest must provide consumers full disclosure about the costs of annual maintenance and association dues, and the limitations and characteristics of the purchased timeshare interest. Additionally, Trendwest must provide specific new notices that clearly inform consumers about their cancellation rights, and deliver all promotional incentives at the end of the originally estimated length of sales presentations. The settlement also bars Trendwest from using travel certificates as promotional incentives if the certificates do not allow holders to call a telephone number to select dates when booking a trip.
Trendwest also will be required to investigate all consumer complaints of unfair sales practices and take appropriate corrective actions, and to comply with debt collection laws. The settlement further requires Trendwest to cancel and refund contracts for consumers who paid for memberships when the sale of the membership was unlawful. Additionally, the company must cancel contracts and provide refunds in cases in which it appears buyers unsuccessfully attempted to promptly cancel their purchase.
The settlement approved by the court today is the second judgment the Attorney General's Office has obtained against Trendwest. The previous judgment resolved allegations about marketing practices the company used to entice consumers to attend its sales presentations. Following new complaints received by the Attorney General's Office, DRE, San Mateo County District Attorney's Office and Better Business Bureau, the Attorney General determined additional injunctive relief terms were required.
The judgment grants the Attorney General's Office authority to inspect and copy all of the company's accounts, contracts, correspondence, financial records and other documents related to the case. The DRE also is authorized to conduct onsite investigations of Trendwest and inspect its records, at the company's expense.
Trendwest's parent company, Cendant, describes itself as one of the world's foremost providers of travel, real estate, vehicle and financial services. The brand names wholly or jointly owned by Cendant include: Ramada, Howard Johnson, Days Inn, Super 8, Travelodge, Avis, Coldwell Banker, Century 21 and Cheap Tickets.