For thousands of consumers hoping to shed restrictive and expensive timeshare contracts, one Bellevue company’s promise to “get you out or give you every penny back” seemed like a saving grace.
It was actually a scam that bilked clients for up to $8,795 per timeshare without, in most cases, delivering for consumers, according to a lawsuit by Washington’s Attorney General Bob Ferguson.
The company, Reed Hein & Associates LLC, targeted “customers across North America to sell their illusory services,” according to the AG’s Feb. 4 suit in King County Superior Court, “mislead(ing) consumers at every step of the process.”
“Virtually every one” of the AG’s claims are false, said Steve Fogg, an attorney representing Reed Hein. The company plans to dispute the case in court.
“This is maybe the most anti-consumer protection action Bob Ferguson has ever taken,” Fogg said. “To me, this suit is just blowing a kiss to the timeshare industry, one of the biggest enemies to consumers.”
Timeshares charge a buy-in cost and annual maintenance fees in exchange for access to resort destinations, usually for a specific period of time — say, a week in March. To finance the buy-in costs, which can run to tens of thousands of dollars, buyers often borrow money from resort developers, typically at high interest rates.
But if erstwhile vacationers decide they no longer want to spend mid-October in Ocean Shores — perhaps because they’re less liquid, or less mobile, than before — it can be tricky to wriggle out of the tight contracts, which typically have “perpetuity clauses,” binding the owner for life.
That’s spawned a cottage industry of companies promising to help consumers transfer or exit their timeshare contracts, including some too-good-to-be-true deals with high upfront fees. Federal regulators have warned consumers of such scams for years.
According to the AG’s lawsuit, in 2012, 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. The company marketed itself as an expert in helping consumers free themselves from their timeshares.
Over the course of eight years, Reed Hein contracted with nearly 32,000 timeshare owners, including 2,500 Washingtonians, who hoped to get out of their contracts, the AG alleges.
Nearly half those clients are still waiting for relief.
“Thousands of consumers have waited years for a positive outcome from Reed Hein — but it hasn’t happened,” Ferguson said in a statement.
Even many of the clients Reed Hein claims to have successfully freed from their contracts are still stuck making payments, according to the AG’s suit.
And because the customer technically no longer owned the timeshare, the company considered foreclosure a successful outcome. It counseled thousands of clients to simply stop making loan payments to resort developers, despite knowing it could trash their credit.
Alternatively, Reed Hein contracted with vendors who engaged in shady legal practices to get consumers out of paying their timeshare contracts, the AG alleged.
More recently, according to the suit, the company stopped dealing directly with resorts at all. Instead, it gave clients talking points, then extracted payment from them “for the privilege of negotiating their own exits.”
And despite its money-back guarantee, it’s proved nearly impossible for customers to get anything back from the company.
Notwithstanding the nearly 900 complaints concerning timeshare or timeshare-exit companies to the state Attorney General’s consumer protection division, Jason Gamel, the CEO of timeshare industry group American Resort Development Association, said he believes timeshare owners are generally happy with their purchase. A study funded by his organization charted record timeshare sales in 2018.
“I’m not going to say there aren’t people out there who are looking to get out of a contract,” he said. But, he said, hiring a timeshare-exit service isn’t the way to do it.