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REGULAR

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The Department of Trade and Industry needs to take action to regulate the use of trust accounts. It’s time that something is done.

Noel Josephides

The Association of Independent Tour Operators has a Government-licensed subsidiary body called AITO Trust that bonds the non-licensable turnover (anything that does not include flights) of about 60 of itsmembers.

Like the Civil Aviation Authority and ABTA, AITO Trust monitors the performance of those 60 companies, sets the level of their primary bonds and has a shortfall insurance of £2 million in place in case the primary bond of a collapsed tour operator is insufficient to repay money lost by its clients.

Modelled on the CAA, both AITO’s and ABTA’s client protection systems are about as safe as you could get.

For years now, AITO has been telling the Department of Trade and Industry that to allow individual companies or organisations to use trust accounts as a means of protecting client monies is seriously flawed. The collapse of the Air Travel Holidays Trust once more highlights the fact the DTI must take action to regulate the use of trust accounts.

A trust account can only be considered effective if there is an insurance in place which will guarantee repayment to the client regardless of whether or not funds were paid into the trust account and regardless of whether or not sufficient premium payments were made by the collapsed company to the insurance company putting up the cover to repay client monies. The Travel Trust Association has such a system in place.

There are many companies that run individual trust accounts very well, but others are not so honest. As ever, the honest ones end up paying for those who abuse the system. When a member of the public writes out a cheque to a company operating a trust account, they can never be sure which account that money goes into.

An operator or an agent with short-term cash-flow problems may decide to pay some cheques into its ordinary bank account instead of the trust account. How would anyone know?

I assume the Government doesn’t want to change anything because, so far, there have been no high-profile collapses. By keeping the individual trust account system it enables small concerns – which don’t have or don’t want to put up the capital to join ABTA or AITO and do not want to be monitored by the likes of the Travel Trust Association – to continue trading quite legally.

Well, is this fair on the rest of us? Blatantly it is not, but this Government and others previous to it have never had fairness in mind when dealing with our industry. As long as the prices are kept low, apparently it doesn’t matter if every so often the public loses a little of its money.

The DTI maintains an ineffective protection system for the travelling public’s money. It knows very well this makes companies who bond properly uncompetitive, because of the higher costs and capital requirements which come with a workable and safe protection scheme.

Either we want to have a virtually foolproof system in place or we don’t. What we have in place at the moment is hybrid legislation which is both ineffective and, at the same time, unfair to those of us who provide true protection.

I often wonder whether those in Government really understand the issues. My guess is they don’t want to understand.

“As ever, the honest ones end up paying for those who abuse the system”