A recent ABTA rule change will not solve the issue of liability for customers’ cash if it drives bed banks out of membership, but it could lead to increased bonding costs for ABTA agents.
ABTA board member and Thomas Cook director of government and external affairs Andy Cooper issued a warning last week, suggesting: “The question is whether there will be any bed banks in ABTA membership.”
Speaking at a LexisNexis Travel and Tourism Law conference in London, Cooper said ABTA would review the bonding levels of agents in light of the amount of “pipeline money” they hold from clients.
Cooper said: “ABTA is looking at whether it will have to revise its bonding rules because of the amount of money ABTA agents are holding. A lot are holding money over 10 weeks. Some are probably exceeding their bonding.”
ABTA recently “clarified” its rules to place responsibility for customer cash held by agents on the bed banks (Travel Weekly, October 9).
However, the bed banks may prefer to quit ABTA rather than change their status by accepting that responsibility, suggested Cooper, while agents are likely to continue dealing with them because of the financial benefits.
“There is an incentive for the retail agent [because] bed banks do not receive a customer’s money until the point of departure,” said Cooper. “Agents have the benefit of [customer’s] cash for eight to 10 weeks.”
Bed banks could insist on earlier payment. “But if they do that they risk weakening their status [and] they are reluctant to pick up liability under the Package Travel Regulations and VAT under the Tour Operator’s Margin Scheme (TOMS).”