Holiday club scandals are on increase in southern Europe

A typical sunny day on Tenerife, the largest of Spain's Canary Islands. Two British tourists, Paul and Margaret Jenkin of Lambeth, south London, are walking through the resort town of Playa de Las Americas.

On the promenade they are stopped by a friendly fellow Brit, who works for a travel company. He asks if they would like a scratch-card giving them the chance to win a holiday, and to their surprise, they win. "We were planning to come back so it seemed a piece of luck," said Mr Jenkin, 42, an insurance company manager.

To collect the prize, the Jenkins were invited to the company's office for a short presentation. Mr Jenkin said: "There seemed no harm in hearing what they had to say in return for a free trip." Three hours later, the couple had paid £800 as a deposit on a £2,500 membership to a holiday club, and were the latest victims of a scam sweeping through the resorts of southern Europe.

Mr Jenkin added: "The club promised flights and accommodation at four-star hotels around the world for no more than £400 a trip. We would also get big discounts on gas and telephone bills and a string of other savings. It claimed a long history of satisfied customers, was supported by blue-chip UK companies and to top it all was a member of ABTA, the Association of British Travel Agents. That should have meant that if anything went wrong the membership fee would be refunded."

Unfortunately for the Jenkins, and thousands like them, none of it was true. Britain's Office of Fair Trading (OFT) estimates UK holiday-makers spent £40m on membership of bogus holiday clubs over the past year.

And, as the summer holiday season gets under way, the OFT is predicting holiday club scams could collect twice as much this year. The watchdog's Rachael Clark said: "We received 700 complaints about holiday clubs last year. That is twice as much as the year before, and is only the tip of the iceberg."

The OFT says that while the clubs often charge as much as £5,000, they offer "little more than a booking service such as a website or a phone number". It adds: "Unscrupulous clubs often provide only last-minute, limited-availability accommodation. With the addition of expensive flights, supplements and taxes, it could end up costing more than holidays booked through normal routes."

Mr Jenkin decided to investigate his club before paying the balance of his membership fees. He said: "I rang ABTA; they had never heard of the club." Neither had a list of banks and utilities with which the club claimed it was "partnered". When Mr Jenkin checked the company registration, he discovered the business was just a few months old.

The Jenkins' experience is typical of those targeted by unscrupulous holiday companies operating out of the Canary Islands, mainland Spain and Portugal. The same tactics have been used for years to sell timeshare, the use of a villa or flat for a set period of time each year. Sandy Grey, chairman of the Timeshare Consumers' Association (TCA), an independent watchdog, said: "It's the same thing we have been fighting for years: holiday clubs are just the latest evolution." Instead of the right to use a named property, holiday clubs rely on offering a range of tempting discounts as "club benefits".

But since 1999 timeshare sellers have been required to give customers a ten-day cooling-off period during which sales can be cancelled and no money can be taken. Mr Grey said: "Ironically the new laws have encouraged holiday clubs because they are not covered. It has also given rise to companies selling second-hand timeshares, which they claim makes them exempt."

For those taken in by the holiday club salesmen, there is little chance of getting any money back. Regulators in England, Spain and Portugal are ill-equipped and often reluctant to pursue claims. Suing the companies serves little purpose. The TCA says the average cost of suing a company in Spain is £20,000 to £30,000 and doesn't recommend it for amounts under £20,000 – far more than most people pay in memberships. And victims often find they have forfeited their right to complain anyway. Contracts often include a clause absolving companies from honouring the extravagant promises of their sales force. Finally, businesses that are caught have a habit of slipping into bankruptcy, leaving members with nothing. Some 17,500 members of the Diamond VSI holiday club discovered this to their dismay last year.

The exception is if you paid by credit card, in which case you are protected under the UK's Consumer Credit Act. That gives you ten days to cancel any purchase. After that you may still be able to cancel the payment, at your bank's discretion.

Mr Jenkin is trying to get his money back. "I have contacted the club but all I have is an e-mail address and no one is responding. Thankfully I paid using a credit card so I am also going through my bank. I am hopeful of getting some money back, but the whole ordeal has left me very angry."

If you are interested in buying timeshare, the TCA has a list of recommended dealers and advice on its website: www.timeshare.org.uk. The OFT has a leaflet on holiday clubs at www.oft.gov.uk.

How the scam works:

* British salespeople look for British couples.

* Prizes are offered in return for attending a presentation

* Extravagant promises are made, backed up by glossy brochures

* "Surprise" non-holiday benefits are revealed such as discounts on gas and phone bills

* Bogus associations with well-known companies are used to gain confidence

* Bonuses and bullying are employed to get people to sign immediately

* Customers are discouraged from taking, or are not allowed to take, information away

* Contracts are basic and include clauses nullifying verbal promises

Office of Fair Trading advice:

* Don't go to the presentations

* If you do go to a presentation, don't sign anything there and then. If you can't take the contract with you, walk away

* Check if the company is offering cancellation rights and that they are written down – if you are not happy with the cancellation terms, walk away

* Check that all verbal claims made in the presentation are included in the contract – if not, walk away