A Kirkland “timeshare exit” firm accused of misleading customers must refund some of its former clients who paid the company to help them escape their timeshares, per the terms of a consent decree filed Tuesday in King County Superior Court.
The firm, Reed Hein & Associates LLC, also faces $22 million in penalties and legal fees, but will only pay $2.6 million so long as it adheres to the terms of the consent agreement, which compels the company to cease making inaccurate claims about its abilities to get timeshare owners out of their financial obligations to resort developers.
Reed Hein was established in 2012, after co-founder Brandon Reed — at the time working as a gutter salesman — attended a trade show, where he “noticed a long line at a booth selling timeshare exit services.” With Trevor Hein, he formed Reed Hein.
Washington state Attorney General Bob Ferguson sued Reed Hein last year, alleging the company’s promise to “get you out [of your timeshare] or give you every penny back” was a scam that bilked clients for up to $8,795 per timeshare without, in many cases, delivering results.
Reed Hein proved unable to help nearly half of its nearly 32,000 clients nationwide, the AG contended in the suit, but made grossly inflated claims about its successes to woo new customers. Nor did Reed Hein have a secret recipe for getting clients out of their timeshare contracts: In many cases, the company merely provided customers with a script they could use to negotiate their own exits, or advised them to simply stop making payments on their timeshares, knowing that would lead to a credit-trashing foreclosure.
And despite its stated 100% money-back guarantee, many unhappy Reed Hein clients were never able to get a refund, according to the AG’s complaint.
“Reed Hein deserves its F rating from the Better Business Bureau,” Ferguson said in a statement Tuesday. “Their dishonesty and reckless behavior had grave financial consequences for its customers.”
An attorney for Reed Hein cast the consent decree as a victory for resort developers selling timeshares.
“I look forward to the day when Bob Ferguson investigates the timeshare industry with the vigor with which he investigates those who advise folks who are seeking to escape the timeshare industry,” Reed Hein attorney Steven Fogg said. Fogg later said his comment was made as an individual, not on behalf of the company, which he represents.
The terms of the consent decree prohibit Reed Hein from claiming its services are risk free, or making any assertions about its success rates or strategies that are not supported by evidence. For new customers, Reed Hein will also need to abide by any refund policy that it advertises, and allow customers to opt out of paying for Reed Hein’s services after three years. And it will need to disclose more details about its relationship with vendors that Ferguson, in his initial complaint, had said sometimes pursued legally questionable methods to get customers out of a timeshare.
Former Reed Hein customers may be in for a payout, too.
The consent decree mandates Reed Hein refund customers who paid the company to negotiate a timeshare exit on their behalf, so long as the customers document that they were able to get out of their timeshare without Reed Hein’s assistance. Reed Hein clients residing in Washington may be eligible for additional restitution through a fund set up by the state, according to Ferguson’s office.
Reed Hein also publicly retracted and apologized for statements by its attorney in a Seattle Times article last year about the lawsuit. The article quoted Fogg as saying that the suit was “maybe the most anti-consumer protection action Bob Ferguson has ever taken.”
Reed Hein has also faced litigation from resort developers Diamond Resorts, Westgate and Wyndham, claiming that Reed Hein falsely advertised its ability to get clients out of their timeshare contracts. Reed Hein this year reached settlements with Westgate and Wyndham.