BILL ANALYSIS �
AB 126
Page 1
Date of Hearing: May 7, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 126 (Hall) - As Amended: May 1, 2013
SUBJECT : TIME SHARE ASSOCIATION: MANAGEMENT AND GOVERNANCE
KEY ISSUES :
1)IS THERE SUFFICIENT RATIONALE OR EVIDENCE TO JUSTIFY CREATING
A SPECIAL RULE FOR TIMESHARE CORPORATIONS RESTRICTING MEMBERS'
RIGHTS TO CONTACT INFORMATION FOR OTHER MEMBERS?
2)WOULD OTHER ALTERNATIVE MEANS OF STRENGTHENING PROTECTIONS
AGAINST POTENTIAL MISUSE OF MEMBERSHIP INFORMATION OR
FACILITATING MEMBER COMMUNICATIONS BETTER ACHIEVE THE AUTHOR'S
WORTHY GOALS WITHOUT NEGATIVELY AFFECTING THE RIGHTS AND
INTERESTS OF MEMBERS?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
Some timeshare owner associations are organized as nonprofit
mutual benefit corporations (NMBCs). Those that choose this
form of organization are subject to the general rules covering
all NMBCs, which are designed to be self-governing bodies
operated for the benefit of the membership. These laws give
members a right to membership information regarding other
members in order that they can share common concerns and
interests, participate in governance, and otherwise exercise
their rights as members. This bill, sponsored by the timeshare
industry, would restrict those rights for members of timeshare
NMBCs. Specifically, the bill provides that a timeshare NMBC
shall provide membership lists only regarding those members who
affirmatively opt-in to be on that list; otherwise the timeshare
corporation would provide an "alternative method" of its choice,
at the expense of the requesting member, to accomplish the
purpose for which the member sought the list.
The author argues that this unique treatment of timeshare
corporations is needed because a 2011 court ruling has
jeopardized the privacy protections created in the Timeshare Act
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which potentially risks thousands of Californians' personal
information being made available and sold for commercial
purposes or used potentially to commit acts of identity theft.
Despite the author's laudable goals, however, these risks appear
to be remote and unproven - because the bill restricts access to
member information by members, not third parties - and therefore
the assumed harms are arguably insufficient to outweigh the
considerable impact that the bill would have on governance of
timeshare NMBCs, particularly regarding disputes between
timeshare members and management. Moreover, the bill may
ironically expand the timeshare corporation's rights to share
member information with third parties.
Nevertheless, the author's goals of protecting timeshare members
from harm by third parties could be addressed by amendments
requiring members to opt-in to third-party sharing of their
information, as well as strengthening the rights, remedies and
procedures available to members when their information is shared
inappropriately. Additionally, if the timeshare corporation
wishes to deny members access to membership contact information
and rely instead on an alternative method of communication, it
could bear the cost of that alternative method so that members
are not disadvantaged by denial of the membership list.
SUMMARY : Constricts the rights of timeshare owners to obtain
contact information regarding fellow owners when the membership
corporation is organized as a nonprofit mutual benefit
corporation and potentially expands the rights of timeshare
corporations to share information with third parties.
Specifically, this bill :
1)Provides that when a timeshare association is operated as a
nonprofit mutual benefit corporation (NMBC) it shall provide
owners with the opportunity to give written consent to the
release of member contact information when members seek the
release of this information, and allows the association to
release member contact information when requested by a member
pursuant to the nonprofit mutual benefit corporations law.
2)Provides that contact information for those owners who do not
provide consent may not be shared with a member, and the
association shall use an alternative method, as prescribed in
the NMBC law, that reasonably and in a timely manner
accomplishes the proper purpose set forth in a demand.
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3)Prohibits a timeshare association from providing the names and
postal addresses of timeshare owners to any timeshare owner or
to publish or provide this membership information to any third
party, or to use or sell this information for commercial
purposes.
EXISTING LAW :
1)Provides that a nonprofit mutual benefit corporation (NMBC)
may be formed for the benefit of its members, rather than for
a charitable, religious, or public purpose, (Corporations Code
section 7111); provides that an NMBC may admit persons to
membership as provided in its articles or bylaws, or may
provide in its articles or bylaws that it shall have no
members; provides that it may issue memberships having
different rights, privileges, preferences, restrictions, or
conditions, as authorized by its articles or bylaws, and
regulates the termination of membership rights (Corps Code
sections 7310, 7330, 7341); and regulates the notice and
conduct of NMBC meetings, voting rights, the election of
directors and related matters. (E.g., sections 7511, 7517,
7520, 7521, 7522, 7523, 7524, 7525, 7526, 7527.)
2)Provides that every NMBC shall allow its members to inspect
and copy the record of other members' names, addresses and
voting rights, and/or to obtain a list of that information if
a member makes a written demand stating a purpose that is
reasonably related to the requesting member's interest as a
member. (Corporations Code section 8330 (a).)
3)Requires that a requesting NMBC member tender a reasonable
charge if the member requests a list of the information.
(Corporations Code section 8330 (a).)
4)Allows a NMBC to offer a requesting member any alternative
method of achieving his or her purpose without providing
access to or a copy of the membership list so long as the
alternative method reasonably and in a timely manner
accomplishes the requesting member's proper purpose.
(Corporations Code section 8330 (c).)
5)Permits the corporation to deny the member access to the list
where it provides a reasonable alternative, or if the
corporation reasonably believes that the information will be
used for another purpose unrelated to the requesting member's
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interest as a member. (Corporations Code section 8330 (b).)
6)Except with the consent of the corporation board, prohibits a
membership list or any part thereof from being obtained or
used by any person for any purpose not reasonably related to a
member's interest as a member, including being: (a) used to
solicit money or property unless such money or property will
be used solely to solicit the vote of the members in an
election to be held by their corporation, (b) used for any
purpose which the user does not reasonably and in good faith
believe will benefit the corporation; (c) used for any
commercial purpose or purpose in competition with the
corporation; (d) sold to or purchased by any person.
(Corporations Code section 8338.)
7)Further provides that any person who violates these
prohibitions on use shall be liable for any damage such
violation causes the corporation and shall account for and pay
to the corporation any profit derived as a result of said
violation. In addition, a court in its discretion may award
exemplary damages for a fraudulent or malicious violation, and
may award the corporation reasonable costs and expenses,
including reasonable attorneys' fees, in connection with such
action or proceeding. (Corporations Code section 8338.)
8)Also allows but does not require an NMBC to petition the
superior court of the proper county for an order setting aside
the demand where the corporation, in good faith, and with a
substantial basis, believes that the membership list will be
used for a purpose not reasonably related to the interests as
members of the person or persons making the demand or if the
corporation members or provides a reasonable alternative as
described above. (Corporations Code section 8331.)
COMMENTS : The author explains the reason for the bill as
follows:
A time-share is a form of property ownership in which many
individuals hold rights to use a property for a specific
period of time. Many time-share properties are managed by
non-profit associations which maintain the properties for
their owners' use.
In 2004, the Vacation Ownership and Time-share Act (Act)
was signed into law, designed to clarify, consolidate and
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clean up various areas of law governing the growing number
of time-share properties throughout California. The Act
included important owner privacy protections including
prohibitions from ownership lists being sold for commercial
purposes.
A 2011 court ruling has jeopardized the privacy protections
created in the Act by requiring that time-share
associations directly provide their members personal
information to a third party upon request, when an
alternative means is not agreed to by the requestor. This
potentially risks thousands of Californians' personal
information being made available and sold for commercial
purposes or used potentially to commit acts of identity
theft.
AB 126 will require time-share associations to secure the
owner's consent before sharing their personal information
with another member. If an owner does not consent to their
information being shared directly, they may still be
communicated with through an alternate means in a timely
and appropriate manner that provides for the privacy of
their personal information.
This bill reaffirms the privacy protections for time-share
property owners created in the Act and closes a dangerous
loophole that exposes time-share owners to the potential of
identity theft.
Statements By Supporters . The sponsor of the bill is the
American Resort Development Association, Inc. One of ARDA's
subsidiaries, the ARDA Resort Owners Coalition (ARDA-ROC) writes
in support of the bill as follows:
AB 126 will prevent the sale of names and addresses of
timeshare owners to third parties - many who use those
lists to market scam services to timeshare owners.
Section 11273(e) of the Business and Professions Code was
written to protect the privacy of the names and addresses
of the owners of time-share interests within time-share
plans, such that the owner's association of a time-share
plan could not be required to publish or provide a copy of
the list of owners to any time-share interest owner or
third party or use or sell the list for commercial
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purposes.
Recently, the Court of Appeals of the State of California,
Third Appellate District, held that California Corporations
Code Section 8330 grants members of a nonprofit mutual
benefit corporation the right to inspect and copy, or
obtain for a reasonable charge, the record of names,
address, and voting rights of the members of the
corporation upon 10 days' written notice, provided it is
for a purpose reasonable related to the person's interest
as a member. Many timeshare associations in California are
also corporations that are also subject to Section 8330.
Based on the court's ruling that association owners' lists
and access to those lists are governed by both the
Time-share Act and the Corporations Code for non-profit
associations, it is considerably more difficult to protect
the privacy of time-share owners and to comply with
requests by owners for access to these lists.
As a result of the ruling any timeshare owner could easily
get their association's lists and sell those lists to any
third party. The fact is, timeshare associations
frequently have a membership list that can easily be in
excess of ten thousand members, such a list on the open
market would easily be of substantial value, particularly
to unscrupulous parties who prey upon timeshare owners. In
addition, dissemination of such a list can expose
personally identifiable information of owners to third
parties, which information might not otherwise be
publically available (keeping in mind that a timeshare is
not an owner's primary residence, and the information
provided in many cases is not public information).
AB 126 informs timeshare owners of their right to
communicate with each other. It assumes owners do not want
contact information shared unless they consent. It
maintains methods for members to communicate with each
other even if they do not consent to sharing their
information. And it remains consistent with the non-profit
code section as per the recent court ruling.
Wyndham Vacation Ownership, Inc. also advocates for the bill,
stating that it is the "largest timeshare developer and
timeshare association manager in the United States and has a
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substantial presence in California through its Wyndham Vacation
Resorts and WorldMark brands." Wyndham argues:
AB 126 will amend Section 11273(e) to assist in protecting
the privacy of our timeshare owner's information, which was
the original intent of the California Timeshare Act
provisions of 2005, while still providing the members of
the Association the opportunity to communicate with each
other as needed on matters relating to legitimate
association business.
The timeshare owners are a prime target to resale and
transfer company scams that have been defrauding timeshare
owners out of millions of dollars in California and
throughout the United States. The passage of AB 126 will
assist in helping to protect the security of association
membership list so that it will not fall into the hands of
individuals or companies looking to defraud our members.
The current California Timeshare Act contemplates that the
association may not publish or provide a copy of the
owner's list to any third party or use or sell it for
commercial purposes. AB 126 provides reasonable guidance,
clarifying how members of the association will be able to
communicate with other owners if the communication is to
advance legitimate association business.
What Is A Timeshare? According to the Federal Fair Trade
Commission, there are two basic vacation ownership options:
timeshares and vacation interval plans. Both a timeshare and a
vacation interval plan require payment of an initial purchase
price, which may be financed over time, plus periodic
maintenance fees which are likely to increase every year. (See
Timeshare property interests, Federal Trade Commission
(http://www.consumer.ftc.gov/articles/0073-timeshares-and-vacatio
n-plans.)
A timeshare is a long-term ownership interest - although not an
"investment," the FTC warns. "In a timeshare, you either own
your vacation unit for the rest of your life, for the number of
years spelled out in your purchase contract, or until you sell
it. Your interest is legally considered real property. You buy
the right to use a specific unit at a specific time every year,
and you may rent, sell, exchange, or bequeath your specific
timeshare unit. You and the other timeshare owners collectively
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own the resort property." (Id.) The FTC describes the
Right-to-Use Vacation Interval Option as one in which "a
developer owns the resort, which is made up of condominiums or
units. Each condo or unit is divided into 'intervals' - either
by weeks or the equivalent in points. You purchase the right to
use an interval at the resort for a specific number of years -
typically between 10 and 50 years. The interest you own is
legally considered personal property. The specific unit you use
at the resort may not be the same each year. In addition to the
price for the right to use an interval, you pay an annual
maintenance fee that is likely to increase each year." (Id.)
The FTC further explains, "Unless you've bought the timeshare
outright for cash, you are responsible for paying the monthly
mortgage. Regardless of how you bought the timeshare, you also
are responsible for paying an annual maintenance fee; property
taxes may be extra. Owners share in the use and upkeep of the
units and of the common grounds of the resort property. A
homeowners' association usually handles management of the
resort. Timeshare owners elect officers and control the
expenses, the upkeep of the resort property, and the selection
of the resort management company." (Id.)
According to one recent report, there are 8.1 million timeshares
in the United States; Florida is the most popular state,
followed by California. The average price as of 2010 was
$19,300. The average resale price from 2009 to 2012 was $9,000,
with 20 percent below $1,000. The average maintenance fee is
$731 annually. Not unlike a common interest development,
failure to pay these fees can result in foreclosure and loss of
money and property. (See Timeshare resale scams surging,
Sacramento Bee, Mar. 25, 2012.)
Many Timeshare Owners Associations Are Organized as Nonprofit
Mutual Benefit Corporations And Are Therefore Subject To The
Laws That Govern All Such Corporations. According to the
industry, some timeshare owner associations are organized and
operated as nonprofit mutual benefit corporations - a type of
nonprofit that is set up to serve its members for a
non-charitable purpose. Other timeshare owner groups are not
operated as NMBCs. For example, they may be unincorporated
associations, or they may be organized as for-profit mutual
benefit corporations.
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When a timeshare association chooses to adopt the NMBC form, it
is required to adhere to the governance and other rules
regulating those types of corporations. For example, California
law regulates who may be a member of an NMBC, their voting
rights, privileges, preferences, restrictions, or conditions,
and the termination of membership rights. The NMBC law
similarly regulates the notice and conduct of meetings, the
election of directors, and related matters.
In Order For NMBCs To Work As Designed, Members Need To Be Able
To Contact One Another So That They Can Exert Control Of The
Corporation. Because members of an NMBC have shared interests
in their long-term ownership rights and obligations regarding
the corporation and their fellow members, it is important that
they be able to contact fellow members. The right to contact
other members of an NMBC is fundamental to the nature of the
organization, which is designed to be self-policing by its
members and is therefore not subject to the same oversight by
the Attorney General as other types of nonprofit corporations.
These rights may be especially important for timeshare members
who are essentially absentee owners who interact with only a
tiny fraction of their fellow owners during their short
vacations once per year.
Specifically, the law provides that every NMBC shall allow its
members to inspect and copy the record of other members' names,
addresses and voting rights, and/or to obtain a list of that
information if a member makes a written demand stating a purpose
that is reasonably related to the requesting member's interest
as a member. A requesting NMBC member must tender a reasonable
charge if the member requests a list of the information. When
an NMBC receives a request for membership information from a
member it may, instead of providing a list, offer the requesting
member any alternative method of achieving his or her purpose
without providing access to or a copy of the membership list so
long as the alternative method reasonably and in a timely manner
accomplishes the requesting member's proper purpose.
Recognizing that membership lists can have commercial value, the
law prohibits a membership list or any part of the list from
being obtained or used by any person for any purpose not
reasonably related to a member's interest as a member, including
any commercial purpose, or purpose in competition with the
corporation, as well as sale to any person.
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In addition, the Corporations Code provides that any person who
violates these prohibitions on use shall be liable for any
damage the violation causes the corporation, and shall account
for and pay to the corporation any profit derived as a result of
the violation. In addition, the court may award the corporation
reasonable costs and expenses, including reasonable attorneys'
fees, in connection with such action or proceeding, as well as
punitive damages for a fraudulent or malicious violation.
The obvious purpose of this statutory scheme is twofold: to
allow members access to the membership list for purposes related
to their interests as members, and to protect the sensitive
nature of a nonprofit corporation's membership lists. "A danger
exists in allowing too free an access to membership lists;
however, the potential for abuse must be balanced against a
member's legitimate needs and rights to utilize lists in
election contests and for purposes reasonably related to a
member's interest." (Worldmark v. Wyndham Resort Development
Corporation (2010) 187 Cal. App. 4th 1017, 1030-31.)
This Bill Is In Response To An Appellate Court Decision
Recognizing That When Timeshare Corporations Are Organized As
Nonprofit Mutual Benefit Corporations Members Have The Normal
Rights To Member Contact Information Enjoyed By Members of All
Nonprofit Mutual Benefit Corporations. The roles and
relationships of NMBC timeshare corporations and their members
are reflected in a recent court decision that prompts this
bill's effort to change the law.
In Worldmark v. Wyndham Resort Development Corporation (2010)
187 Cal. App. 4th 1017, Robin Miller, a member of the WorldMark
timeshare corporation, asked that WorldMark make available to
its members a petition proposing amendments to the corporation's
bylaws. Miller's proposed petition expressed a concern over the
domination of WorldMark's board of directors by current or
former Wyndham executives, the failure to conduct meetings at
which member motions could be raised and voted upon, the absence
of any independent owners on the board, and the lack of
meaningful member representation in the governance of WorldMark.
The proposed resolutions would, if passed, revise WorldMark's
bylaws to address these concerns. WorldMark however had
"serious concerns about the detrimental effect the petition
measures would have on the Club if implemented."
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When WorldMark refused to circulate his petition, Miller
demanded a right to inspect and copy WorldMark's membership
records, including the e-mail addresses of its members, for the
purpose of distributing his petition to amend the bylaws.
E-mail is one of the methods that WorldMark uses to communicate
with its members. Instead of scheduling an opportunity for
Miller to inspect the membership register as provided in the
WorldMark bylaws, WorldMark told Miller that the membership
register did not include e-mail addresses (although it was later
disclosed that WorldMark did in fact have email addresses), and
informed him that the policy of the board was that members not
be allowed to inspect or copy the membership roster "because of
privacy concerns and because of the roster's tremendous
commercial value." Instead, the board proposed to provide a
"reasonable alternative as provided by California law." The
alternative procedure required that the member deliver to
WorldMark's offices a copy of the materials he or she desired to
be sent to the other members. If WorldMark determined that the
content was not commercial in nature and was reasonably related
to the affairs of the corporation, it would contact the member
demanding payment for WorldMark's cost of providing the
information, then upon receipt of payment, would provide the
member with the name of a mail house to contact in order to
arrange the mailing of the materials at the owner's expense.
When Miller refused this procedure, WorldMark filed suit to set
aside Miller's demand on the ground it had satisfied its
statutory obligations in proposing an alternative. However, the
court ruled that the alternative was not reasonable because it
was too costly. Specifically, the court found that the cost to
Miller of the proposed alternative would be $1 per member for
alternative mailing, resulting in a cost of over $260,000.
Consequently, the court ordered WorldMark to allow Miller to
inspect and copy WorldMark's membership register, including the
names, addresses, e-mail addresses, telephone numbers, and
voting rights of its members.
This Bill Would Create A Special Rule For Timeshare Owner
Associations, Exempting Them From The General Rules Regulating
The Rights And Obligation of Nonprofit Mutual Benefit
Corporations. Contrary to the general rule applicable to all
NMBCs, this bill would restrict access to membership contact
information for timeshare NMBCs, likely causing greater
difficulty and expense for members. In place of the right to
obtain a list of all members, this bill would require each
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member to specifically exercise an option to be on the
membership list. Unless each member opted-in, the only way a
requesting member could contact other members would be through
an alternative process, such as the third-party mailing house
proposed in the WorldMark case.
As the WorldMark case suggests, the use of third-party mailing
houses and other alternatives can be far more costly to the
requester than having access to the list because the alternative
method is chosen by the corporation but must be paid for by the
member. As a result, members may find it more difficult,
time-consuming and expensive to contact each other regarding
operation and management of the timeshare corporation, all of
which may frustrate exercise of their governance rights.
Moreover, if this rule were adopted there would appear to be
little justification for not extending the precedent to all
nonprofit mutual benefit corporations, upsetting the
well-settled balance of rights and interests reflected in the
NMBC statutes.
As discussed below, the ostensible reason for this special
treatment of timeshare corporations is the asserted risk of
identity theft, fraud, and potential sale for commercial
purposes. However, these rationales appear to be largely
conjectural.
The Requirement That Members Opt-in To The Membership List Is
Significant Because It Is Widely Acknowledged That Consumers
Generally Do Not Exercise Their Options. As in all proposed
privacy-related legislation, the default setting proposed by
this bill is critical because experience shows that consumers
rarely take the required action to exercise their option.
Whether because of inertia, lack of information,
misunderstanding, or other reasons, most people do not exercise
a right to opt-in unless they are both aware and highly
motivated to act. In the context of this bill, an opt-in
approach probably means that few if any members would likely be
on the membership list available to fellow members. As a
result, the bill all but eviscerates a member's right to obtain
a list of other members, even when the requesting member has a
legitimate and lawful reason related to his or her membership as
in the WorldMark case.
Considerable Uncertainty Regarding Proposed Opt-in Process. In
order for anyone to exercise a right to opt-in they must be
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aware of their right to do so and the process by which to make
their decision effective. This bill does not require timeshare
corporations to inform members about their rights and options.
It states only that the timeshare corporations shall "provide
owners with the opportunity to give written consent" to the
release of member contact information. Nor does it say when or
how this "opportunity" would be provided. In the absence of
these essential details, it is not clear that this bill provides
a meaningful right to opt in, even if an opt-in approach were
the proper policy choice.
This Bill Also Appears To Restrict Member Access To Information
Regarding Voting Rights, Not Just Contact Information. Under
the nonprofit mutual benefit law, members have the right to not
only the names and addresses of members but also to information
regarding the voting rights of other members. (Corporations
Code section 8330 (a).) This bill would evidently prohibit
release of information regarding voting rights, even for those
who took the trouble to opt-in, because it allows the timeshare
corporation to release only "contact information."
Is There A Sufficient Privacy Rationale For The Restrictive Rule
Proposed By This Bill? Supporters contend that the bill is
needed because the WorldMark decision "jeopardized the privacy
protections created in the Act by requiring that time-share
associations directly provide their members personal information
to a third party upon request, when an alternative means is not
agreed to by the requestor. This potentially risks thousands of
Californians' personal information being made available and sold
for commercial purposes or used potentially to commit acts of
identity theft." Although membership information is available
to members under existing law, supporters have offered no
evidence that these harms have materialized.
Moreover, as discussed above, it is important to note that this
bill relates to membership information requests by members, not
by third parties. Disclosure to third parties is prohibited by
existing law and is grounds for suit, including money damages,
attorney's fees and punitive damages.
In addition, even if members use the information improperly, it
should also be noted that name and address information is not an
important source of identity theft. Customer names and
addresses, of course, are widely shared by many businesses -
including timeshares - under existing law. Identity theft
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typically involves obtaining sensitive personal information such
as Social Security numbers, ATM and other financial account
access codes, credit card numbers, and the like. Such basic
information as names and addresses, by contrast, is
traditionally available in a telephone book and other public
records and does not present significant risks of identity theft
because it does not allow for access to finances or allow for
impersonation. Certainly if the availability of customer name
and address information is a serious threat to consumer privacy,
California law has far to go to address this problem in many
contexts.
Ironically, companies that run timeshare developments have
reportedly not always been protective of more sensitive personal
information. The Federal Trade Commission sued the Wyndham
Corporation last year over allegations that it failed to take
proper security measures to protect consumers' credit card data
and made deceptive claims about its privacy policy. (See FTC
sues Wyndham over alleged credit card breaches, Los Angeles
Times (June 26, 2012) (available at
latimes.com/business/la-fi-wyndham-breach-20120626,0,3822917.stor
y.)
Timeshare Owner Corporations Have An Existing Legal Right To
Block Release of Membership Information Whenever They Believe
The Requester Does Not Have a Legitimate Purpose For The
Request. As the WorldMark case reflects, members may request
membership lists in disputes with the timeshare corporation
regarding operation of the timeshare. However, if the timeshare
board believes that the member has an improper purpose, or that
the list will be used for another purpose unrelated to the
member's interest, the law permits the board to deny access to
the list. The NMBC may also petition a court for an order
setting aside the demand for the list where the corporation, in
good faith, and with a substantial basis, believes that the
membership list will be used for a purpose not reasonably
related to the interests as members of the person or persons
making the demand or if the corporation members or provides a
reasonable alternative as described above. It therefore appears
that existing law allows timeshare corporations to prevent
release of the information in any situation where there is cause
for concern.
Despite The Author's Laudable Interest In Privacy Protection,
This Bill Appears To Create A Double Standard, Restricting
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Members' Rights to All Membership Information But Allowing the
Timeshare Corporation Greater Rights To Publish And Sell The
Information. As discussed above, the rights of NMBC members to
name and address information includes email addresses.
(Worldmark v. Wyndham Resort Development Corporation (2010) 187
Cal. App. 4th 1017.) This bill would restrict members' rights
regarding all "contact information" of other members, apparently
including email addresses. Supporters argue that this
restriction is protective of members' privacy and is paralleled
by another proposed change which would prohibit timeshare
corporations from providing this information to third parties or
using or selling the information for commercial purposes.
Curiously, however, while restricting members' access to all
contact information the bill restricts timeshare corporations
from using and selling only "names and postal addresses." It
would therefore appear that timeshare corporations would have
greater legal rights to sell and otherwise use email addresses
and other personally identifying information of members.
What is more, the bill may expand the existing authority of
timeshare corporations to sell or share member information.
Under existing law, timeshare corporations may sell or otherwise
release or use membership information only to the extent
permitted in the instruments creating the timeshare plan.
Industry representatives indicate that the act has always been
understood to be a blanket prohibition, which they contend this
bill would reaffirm. If so, however, the bill would ironically
appear to undermine that understanding of current law by
allowing the sale and use of member information without regard
to any restrictions in the timeshare instruments. In other
words, if the standard in the industry is that timeshare
instruments prohibit any sale or use of membership information,
this bill would trump those prohibitions by allowing sale or use
of the information as contemplated by the bill.
The Other Stated Justification For This Bill Is Ostensibly To
Protect Owners From Being Contacted By Timeshare Resellers, Some
of Which May Be Unscrupulous, But Some Of Which Are Legitimate,
And All Of Which Are In Direct Competition With Timeshare
Developers Who Not Only Sell Original Timeshares But Also Have
Their Own or Affiliated Resale Programs . There is an active
market in timeshare re-sales. These resellers of course compete
with original timeshare sales, in the same way that existing
houses compete with new construction, and timeshare developers
therefore encourage sellers to offer their interest back to the
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timeshare developer for sale, rental or simply returning it to
the developer to avoid further costs and foreclosure. (See ARDA
http://www.ardaroc.org/roc/resource-library/default .aspx?id
=2649&libID =2669). The analogy to home sales however may not
be entirely apt because timeshare resale values are reportedly
very low, and the resale product is therefore deeply discounted.
Consequently, developers are in direct competition with
timeshare resell companies who may offer lower prices.
As one popular source describes it,
Timeshare owners face a few difficulties when they try to
sell. The first hurdle is the lack of a strong resale
market. Although statistics vary, all studies show that
there are many more timeshare owners wanting to sell than
there are people looking to buy a timeshare. Another
problem is the likelihood that you will lose money on the
sale of a timeshare. The original price of a timeshare may
have included premiums of up to 40% to cover sales costs.
Also, timeshare properties age and can become less
desirable. So your resale price may be anywhere from 20% to
60% of the original purchase price -- plus you will have to
pay a commission to the broker (often as high as 20% of the
resale price) who sells the property for you. (See
http://www.nolo.com/legal-encyclopedia/timeshares-faq-33022-
3.html.)
The proponents of this bill argue that it is warranted because
of the threat posed by fraudulent resale agents. In particular,
they point to an advisory issued by the Department of Real
Estate notifying timeshare owners of potential problems in this
area. (See Consumer Alert and Warning Regarding Timeshare
Resale Fraud)(available at http://www.dre.ca.gov/files
/pdf/ca/2012/
ConsumerAlert_FraudWarningTimeshareResaleFraud.pdf.) However,
the DRE notice acknowledges, "There are legitimate, reputable,
licensed and competent professionals in the field." The DRE
also notes that there are existing protections against
fraudulent resales activity.
Because timeshare corporations compete with resellers, their
interests in blocking access to membership lists may be greater
than the interests of members in avoiding any possible approach
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by resellers. In any event, supporters have provided the
Committee with no evidence indicating that member contact
information shared with members has caused fraudulent resales or
that existing protections are inadequate.
In Order To Accomplish The Author's Commendable Goals, This Bill
Could Be Amended To Restrict Third-Party Access To Member
Information And Otherwise Strengthen Privacy And Fraud
Protections. Among the measures that may address the author's
worthy concerns, this bill could be amended to restrict
third-party access to membership information. For example, the
bill could adopt an opt-in approach for any sharing of
membership information with third parties.
In addition, the bill could create a new cause of action making
timeshare members vicariously liable for harms caused by any
third parties to whom a member wrongly shares membership
information. The bill might also impose strict liability on
members who misuse or share membership information regardless of
any harm shown by the timeshare association. Further, the
prohibitions against misuse of membership information by members
could be revised to specifically prohibit members from using the
information for the purpose of resale offers.
If the existing penalties are inadequate to deter and correct
misuse of membership information by members, the author may wish
to add a liquidated damages provision or a civil penalty.
Misuse of membership information may also be deterred by
requiring requesting members to sign an acknowledgment of the
prohibitions against using the information for any other purpose
as well as an acknowledgment of the penalties. Further, the
bill might be amended to increase the penalties for and/or
enforcement of resale fraud.
Finally, if a timeshare association wishes to completely deny
access to its membership list and rely instead on an alternative
method of distribution, such as the use of an independent
publishing house, it could bear the cost of the alternative
method so as to avoid the deterrent and detrimental impact on
the requesting member.
REGISTERED SUPPORT / OPPOSITION :
Support
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ARDA Resort Owners Coalition
Wyndham Vacation Ownership, Inc
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334