The Income *Deception!

-by Scoop

January 27, 2012 — Did you know when relaxing at your favorite watering hole after work and partaking in a bevy that the price of your drink includes a ‘spillage’ cost, too? Or, when you purchase an apple from the grocery store that a modest sum is added to the price so the merchant can cover losses incurred from those five-finger discount shoppers? And what does this have to do with timeshare you ask?

So here’s the scoop. Well-run businesses analyze every known cost factor associated with their operation. Then, with those costs and profits, etc. tacked on, they set their net ‘selling-price’. The end result is that the cost of doing business (aka: overhead, etc.) is passed on to the consumer. It has been that way since the dawn of time, is one component to the basic capitalism/business formula and those same principles apply, yes they do Bubba, to the timeshare industry.

For example, each timeshare developer knows what their rescission ratio is and what it costs them to process and recoup from them. Those costs should be/could be/are incorporated in their net (TS) ‘retail price’. Then, as developers do with their (e.g.) marketing costs, etc., they could/can/do pass along the ‘bill’ and the consumer (aka: buyer/new TS owner) ultimately flips the tab, so to speak.

That brings me to, IMO, those deceptive income charge-backs and reserve funds in our industry. First, though, one of the original justifications for rep ‘charge-backs’ and the associated ‘reserve-funds’ in the timeshare industry was introduced decades ago to prevent developers from being ripped off by closers who were ‘heat merchants’.

Those closers con artists were notorious for roaming from developer to developer. They’d get hired, pitch as much ‘heat’ (lie to the sales guests) as their warped minds could conjure up and write up a wind storm of business in the shortest amount of time possible (one or two months).

Then, before they hit the road, they’d get paid— which often included huge ‘daily’ cash spiffs (hundreds of dollars per sale). And with the spiffs in pocket and commissions in the bank they headed down the camino before the complaints/rescissions started pouring in, too often leaving the developer(s) to ‘eat’ the deal(s) and all the spiffs/commissions they paid out to those thieves.

In those days, which were mostly unregulated, I fully supported the developers’ need for the ‘charge back’ (and reserve fund) policies as I knew several of these peddlers who lied through their teeth to close sales; and the really good ones could, and did, bilk developer(s) out of (e.g.) $30,000.00 + (cash/spiffs-commissions) in as little as 30 days before they moved on to their next victims.

But that was then and even though there are still heat merchants around the ‘biz’ the really bad ones are mostly working in Timeshare Land ‘off-shore’. And these days, for the most part, savvy developers (world-wide) won’t allow these rip off artists to work the tables in their sales centers!

In 2012, between background checks, licensing requirements (most jurisdictions) and personal/business references needed to get on a sales line the days of the heat merchant scenario costing developers real losses is pretty much nonexistent, especially considering most developers also employ VLO’s whose primary function is to protect the developer(s) interests.

But, even if the situation was still widespread, developers could (or should) have those losses absorbed into their net selling prices; not to mention there are likely tax benefits/advantages such as deductions, write-off’s, etc. associated with most ‘business expenses’ (and losses) incurred.

So why then do timeshare developers still have those charge-back and reserve fund policies whereby they deduct (usually) 10 % out of every rep’s paycheck up to a set amount and ultimately hold back thousands of dollars (up to $5-K or more per rep) of their reps ‘incomes’ to off-set any potential cancelations?

Which begs another question, which is when cancellations do occur why are developers deducting previously paid commissions/bonuses out of the rep’s very next paycheck, sometimes leaving the rep penniless on payday— unable to cover their ‘bills’ (rent/mortgage, food), etc.— instead of taking the ‘deduction’ out of the rep’s reserve fund?

I’ll leave the reason(s) for readers to decide but since we’re talking about money here is another question to brood over. Why is it that the earned income (reserve funds) being held, sometimes for years, isn’t held in a special escrow account and/or isn’t earning the rep at least some interest to cover or offset inflation. After all, three years from now a few thousand dollars will not have the same purchasing power as it does today!

For the record there are timeshare developers that have an impeccable record when it comes to their handling of cancellations, charge-backs and reserve funds and these developers will even pay back incomes earned (after a ‘grace’ period) and held in reserve to their reps who move on to ‘greener’ pastures.

Sadly, that has not been the rule and over the past four decades my best guess is the vast majority of reserve funds (aka: earned income) retained by most timeshare developers was never returned to the reps and would account for a total of millions and millions of dollars in unpaid earnings (income).

Then there are those ‘special’ developers who hold back incomes based on that bogus 3-6 ‘timely-payments’ scam; meaning, once the sales rep performs the exact duty for which they were hired (sell and close deals) these developers will only pay out 50% of the rep’s earnings on payday and hold back the balance of their income (on top of the reserve fund they withhold).

Then, according to the payout scheme, these developer continue to hold the rep’s earned income (balance of 50%) until such time as the new owner makes all of those ‘timely payments’. And should the new owner miss or be late by one day with their ‘timely payment’ the rep often looses the income being held and in some cases the rep is also charged (pays) back the 50% they were originally paid.

Although I have no proof I do believe I know who the original brain-child was behind that sham and it wouldn’t surprise me in the least if the day wasn’t right around the corner when the same person and like-thinking people start a new ‘timely payment’ deal which would include annual maintenance fees, exchange company dues, etc.

In an industry where many reps work, whether as an employee or I/C (independent Contractor), under the ‘At Will’ provisions (can be fired on the spot and without cause) and where ‘security’ is often a day-to-day issue (aka: you’re only as good as your last ‘deal’) it is time for developers to stop the income deception, fallacy and ploy (aka: a crock) and pay out earned incomes when due and in full!

Scoop

• *Deception
Part of Speech: noun
Definition: trick
Synonyms (including but not limited to): bilk, bluff, cheat, chicane, con, cover-up, decoy, dodge, fallacy, fast one, feint, fib, fraud, gimmick, hoax, hogwash, illusion, jive, lie, malarkey, mare's-nest, pretext, ruse, sham, snow job, stall, swindle, trap, trick, whitewash, wile, and wrinkle.

Email Scoop: scoop@insidethegate.com

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