Welk Resorts to pay $3.5 million for fraud

California Attorney General Xavier Becerra and San Diego County District Attorney Summer Stephan has announced  announced a settlement against Welk Resorts Inc. (Welk) for its alleged misconduct in connection with the offering and sale of timeshare interests.

Welk is a California corporation that develops and operates vacation timeshare resorts in both the United States and Mexico. Today’s settlement resolves allegations that Welk’s sales practices violated California’s Timeshare Law, the Vacation Ownership Timeshare Act of 2004 (VOTA), the Unfair Competition Law (UCL), and the False Advertising Law (FAL).

The proposed stipulated judgment requires Welk to provide up to $3,550,000 in consumer restitution – the largest consumer relief package ever obtained by the People in a case against a timeshare company – and sets injunctive terms that will require Welk to implement a compliance program aimed at preventing future VOTA violations. The complaint, stipulation, and stipulated judgment were filed today in San Diego County Superior Court. The proposed stipulated judgment is subject to court approval.

“Today’s settlement sets an unprecedented example for the timeshare industry – you cannot violate the law and expect to get away with it,” said California Attorney General Becerra. “This settlement is a significant win for California consumers. It provides victims with the largest consumer relief package ever obtained by the People for violations of the Vacation Ownership Timeshare Act, returning money to the pockets of those cheated by Welk.”

“The bottom line is consumers need to know what they are getting up front without false promises,” said San Diego County District Attorney Stephan. “The law protects consumers by prohibiting timeshare salespeople from overpromising with misrepresentations. Truthful disclosures are especially important in a high-pressure sales environment such as timeshare sales. The expertise in our DA’s Consumer Protection Team was brought to bear to protect consumers from false promises in purchasing timeshares.”

Following a string of consumer complaints, Attorney General Becerra’s Office, the San Diego District Attorney’s Office, and the California Department of Real Estate launched an investigation into Welk’s sales practices. Undercover operations conducted with assistance of the California Department of Consumer Affairs revealed that Welk was making false statements and misrepresentations in high-pressure sales presentations at its resort in Escondido, California. These deceptive business practices harmed consumers considering timeshare purchases.

As part of the settlement, Welk will establish a robust consumer restitution program that will provide up to $3,550,000 in restitution to consumers who were affected by Welk’s deceptive sales practices. The restitution program:

• Allows consumers who previously submitted a written complaint with the option to (1) rescind their timeshare purchase agreement with Welk and obtain a full or partial refund or, (2) retain their timeshare interest and instead obtain restitution in the form of cash, a resort credit, or additional timeshare points; and

• Provides notice to other potential victims and the opportunity for them to submit a claim for restitution in the form of cash, a resort credit, or additional timeshare points.

The restitution program provides relief to two groups of eligible consumers. The first are consumers who purchased timeshare points from Welk between January 1, 2011 and March 2016 and have been pre-identified as eligible because they submitted a written complaint alleging a VOTA violation in connection with their purchase.

The second group are consumers who purchased timeshare points during the same time period, but who have not previously submitted a complaint related to their purchases. These consumers will be notified of the judgment and settlement terms and will be given an opportunity to submit a claim form if they believe that Welk committed a VOTA violation in connection with their purchase.

Additionally, Welk has agreed to injunctive terms that require it to implement a compliance program aimed at educating its sales and executive staff on VOTA requirements and preventing violations. The settlement also requires Welk to pay Attorney General Becerra’s Office and the San Diego District Attorney’s Office a total of $2 million in penalties and reimbursement of investigative costs.

Copies of the complaint, stipulation, and stipulated final judgment are available here, here, and here.

Welk customers who have questions about the settlement or regarding their eligibility for relief under the settlement should visit www.welkresorts.com/resolution for more information as it becomes available. Consumers who wish to contact our office regarding Welk Resorts, Inc., or other consumer protection issues may do so online at oag.ca.gov/report.