Agents will pay the price of the Lowcost Travel Group collapse if card issuers react to refunding consumers by raising card-processing charges.
Martin Alcock, director of The Travel Trade Consultancy, warned: “A sector service charge is a risk. The cost of business for everyone could go up off the back of this. It’s always a danger after a big failure.”
Lowcost ceased trading in July with 110,000 forward bookings involving 250,000-plus customers, with administrators Smith & Williamson confirming last Friday “the shortfall in assets runs into many tens of millions of pounds”.
Smith & Williamson noted: “Many customers who paid by credit or debit card have been able to make a successful claim through their card issuer.
However, while this helps customers, it does not reduce the overall losses potentially being assumed by the banks and financial institutions.”
A UK Card Association spokesman said: “The money is coming back [to consumers] from the card issuers. They may look to recoup their money.”
But he added: “The cost the retailer pays is a matter for their acquirer. It’s the retail banks – the merchant acquirers – which process transactions.
“Typically, the card issuer would look to do a chargeback to the acquirer. The acquirer would then try to recover the funds.”
Service charges on card transactions “depend on the type of business and the risk involved”, he said.
“The fact that a company is a travel business would have a certain impact, but it’s not that simple. An acquirer might potentially look at someone with a similar model [to Lowcost].”
Alcock said: “The problem is merchant acquirers have a job to understand their liabilities [in travel] and push up fees accordingly.”
In a possible foretaste, Visa axed a cap on debit fees for merchants with average transaction values above £245 this month.
Price comparison site Cardswitcher noted: “This will particularly impact travel agents.” It suggested agents could see debit-card processing costs “double or quadruple”.