ASIC launches legal action against Gold Coast-based Ultiqa Lifestyle Promotions over its timeshare plan

The corporate regulator has taken aim at a Gold Coast-based timeshare provider for allegedly failing to provide adequate advice to clients, who paid up to $25,000 to invest.

Ultiqa’s Shearwater Resort at Caloundra in Queensland.

Australia’s corporate watchdog has taken legal action for the first time against a timeshare provider for allegedly providing improper financial product advice to clients.

The Australian Securities and Investments Commission announced Wednesday that it had launched civil proceedings against Gold Coast-based Ultiqa Lifestyle Promotions Limited.

The lawsuit alleges customers, who were initially approached at shopping centres, theme parks or similar venues, paid up to $25,000 to join its holiday investment scheme but then discovered a lack of availability when booking getaways.

ASIC claims that Ultiqa’s financial advisers failed to take client circumstances into account when promoting the scheme between October 2017 and March 2019.

It is seeking unspecified financial penalties, as well as other declarations and orders as part of the Federal Court action against the company.

Ultiqa chief executive Mark Henry, one of three directors who launched the business in 2001, did not return a call seeking comment Wednesday.

Ultiqa chief executive Mark Henry

The company stopped selling interests in the timeshare entity early last year and tipped it into voluntary liquidation in April. But the scheme still remains active, as does the rest of the Ultiqa group headquartered at Varsity Lakes.

It’s not the first time the group, which retains a stake in 20 unit buildings across in South East Queensland, has faced scrutiny from the regulator.

Ultiqa’s lending arm Future Holiday Finance Pty Ltd paid a $135,000 penalty and $3m in compensation to consumers in 2018 for “responsible lending failures’’ in the previous six years.

Another Ultiqa entity revised its disclosure and sales practices in 2016 after ASIC received complaints from some of the 12,000 members about allegedly “misleading and deceptive statements and unconscionable conduct’’.

In the current legal action, ASIC says Ultiqa marketing consultants approached people outside busy retail centres and gave them scratch cards.

If three matching symbols appeared, the prospective clients were told they may be entitled to win a prize but had to attend a 90-minutes sales presentation to be eligible.

Once at the sales office, they had to complete a “lifestyle survey’’ and a “holiday survey,’’ followed by a recommendation to invest in the Ultiqa scheme.

Presenters, who earned a commission for each sale, had to follow an approved sales script and were prohibited from deviating from it.

Clients who signed up found that upfront costs ranged from $10,000 to $25,000, with ongoing fees of as much as $800 per year.

Ultiqa’s Shearwater Resort at Caloundra

ASIC alleges some consumers had not sought advice regarding a timeshare scheme and some were not aware they were receiving financial advice

It further claims Ultiqa did not provide relevant training to its authorised representatives, monitor and supervise its staff members appropriately, and have documented policies and procedures in place to support the advice process.

ASIC also alleges Ultiqa’s conduct amounted to a breach of its obligations as an Australian financial services licensee to act efficiently, honestly and fairly.

ASIC Deputy Chair Karen Chester said timeshare schemes were complex financial products.

“They can be difficult to understand and compare with other products, and involve long-term financial commitments,” she said.

“Consumer harm can and has resulted when consumers are not aware of the upfront costs, ongoing fees or the nature of their investment – like how easy (or not) it is to exit.

“This is the first time ASIC has taken action against a timeshare provider in relation to financial product advice practices.

“The timeshare industry is on notice to ensure existing compliance and advice practices comply at all times with the obligations on all financial advisers, especially for that advice.’’

ASIC said there are currently about 15 registered timeshare schemes operating across Australia with about 180,000 members.