Trust account experts report shift towards model

Travel firms are under increasing pressure from credit card companies and shareholders to use trusts to protect customer money.

A panel of experts on trusts reported seeing more companies considering moving to a trust model in the wake of the holiday refunds controversy due to Covid-19.

Speaking in a special Travel Weekly Roadmap to Recovery webcast focusing on trust accounts, Chris Photi, senior partner at White Hart Associates, said he had three significant clients with Atol renewals due in September who were asking him to propose a trust model.

“All three have, of their own volition, said ‘we need to look at operating a CAA trust account’,” Photi said. “So, people are making these decisions. Other options should be open to the travel industry, perhaps under a rebalancing of regulations in certain areas, but trusts are going to become more prevalent.”

Photi conceded trusts are not right for every firm and the transition is not easy, but firms unable to access merchant acquirer facilities, bonding insurance or supplier failure cover may have no option.

Sudheer Sharma, director of PT Trustees, said Covid-19 had exposed the risks in travel to owners, regulators, customers and, crucially, credit card merchant acquirers.

“The acquirers have woken up to what their exposure really is,” he said.

“It’s a confluence of pressure from all these stakeholders that will dictate that solutions are put in place.

“Now is probably the worst time to [switch to a trust model] from a cashflow point of view, but how to protect these monies should have been addressed a long time ago.”

One of the objections to trust accounts is that they are expensive to operate and will push up prices for consumers.

But Daniel Landen, managing director of Protected Trust Services, denied this.

“It’s not just Covid-19, it’s Thomas Cook, the ash cloud, 9/11, the financial crash, Monarch,” he said.

“There’s going to be something next year or the year after and owners and shareholders are asking ‘how exposed are we? Is using consumer funds as working capital good for the business?’ In reality, the cost saving on licensing, merchant services and accounting, done correctly, is more profitable, so why not protect yourself, save money and concentrate on profitability?”

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