As the E-Clear situation came to a head this week, maybe the only positive for the travel trade was that customers will not lose their money.
Although the credit card processing firm has claimed it is paying out to Globespan clients who hadn’t flown by the time of the collapse, it is card issuers who are liable.
Despite the unusual arrangements under which E-Clear mitigated Pago, part owned by Deutsche Bank, from full exposure to the travel industry, consumers remain protected by section 75 of the Consumer Credit Act 1974.
But that should not lessen the urgent need for the travel industry and its regulators to sort out its own financial protection mechanisms.
Back in 2005, in the aftermath of the collapse of large cruise wholesaler Cruise Control, Travel Weekly sought to determine the cost of failure to the industry.
The Civil Aviation Authority, ABTA and many of the cruiselines admitted to relatively tiny sums, despite information prior to the collapse that its failure would cost many millions of pounds.
The stock answer was the majority of the hit was borne by the credit cards, which offer full protection on any transaction over £100 and below £30,000.
Time and again consumers have been told to pay on their credit cards to ensure protection and large parts of the industry have been happy to reiterate that advice.
Cruise Control was no doubt not the first time the credit card industry had to pick up the tab of a travel firm failure. That, though, was at a time when credit was in plentiful supply, before the term “credit crunch” had been uttered.
But now the chickens have finally come home to roost. It’s time for the travel industry to accept that the cost of protecting the customer is one worth paying.
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