THE break-up of the ATOL-bonding consumer protection scheme could lead to an increase in company failures in the peak season and a sharp rise in fraud, industry leaders have warned.
The increasing amount of business outside any financial protection or independent monitoring system, changes in ABTA membership rules, confusion about existing protection and the proposed switch from bonding to a £1 levy on package bookings are causing concern.
Civil Aviation Authority consumer protection group deputy director David Moesli has warned the authority won’t hesitate to shut down firms it believes are a risk.
He said: “We will have to take a different attitude. We’re changing the way we work to focus on companies at risk of failure or causing problems. We would have to be much more proactive in closing companies.”
It is fear of a major failure that prompted ABTA to drop its requirement that members place a bond with the association.
The latest warnings come in the same week ABTA has launched a national and regional press advertising campaign “It’s Never Been Easier To Book A Holiday. It’s Never Been More Important to Protect It”, explaining its changes to consumer protection.
The adverts make it clear it is the responsibility of customers to ensure their holiday is insured in the event of a failure.
ABTA head of legal services Simon Bunce told a Chartered Institute of Marketing Travel Industry Group last week: “We don’t do consumer financial protection any more. If you have online bookings and call centres you have a largely unquantifiable risk.”
Members can provide protection through a trust account or insurance, but ABTA will not monitor these. It has also dropped a requirement that smaller companies submit independent audits of accounts – a move in line with changes in accounting practice.
Yet agencies routinely handle bookings worth many times their declared turnover.
Travel management consultant and former ABTA head of legal services Alan Bowen believes it is a recipe for disaster. He said: “In the last 10 years, up to 50% of payments [by ABTA] after retail failures have been due to fraud.”
Under the new system, he asked: “How will the customer know whether an agent is honest? There will be failures.
And when there is a failure, business will drift from independent agents to major companies because customers don’t think they will go bust. The big names on the ABTA board know that.”
ABTA board member and Association of Independent Tour Operators director Noel Josephides agreed, and suggested failing companies should not be kept afloat through the peak season to avoid affecting large numbers.
“We would prefer companies to fail when they are ready,” he said.
Harry Brown, chairman of the Association of British Insurers’ surety bond committee, warned the proposed £1 levy on package bookings was not a remedy for the industry’s problems.
“We’ve had a benign economy for the last 15 years and very few failures. What if there are problems in a big Mediterranean destination? What if there are failures in high season?
“What if there is a string of failures at the beginning of the scheme and not enough members. If it does not have a Government guarantee, which widow or orphan does it pay?”