There is “widespread opposition” to the CAA enforcing segregation of customer money on Atol holders, according to Abta.
The CAA has acknowledged segregation of client money is its “preferred option” for reform of the Atol scheme but insists “no decisions have been taken” and there will be different ways for businesses to comply with any new requirements.
Speaking on a Travel Weekly Future of Travel webcast on Atol reform, Abta director of financial protection and membership Rachel Jordan said: “There is widespread opposition to mandatory segregation.
“If some form of segregation is the CAA’s preferred option, I feel it’s pushing travel businesses down one route. That could be difficult.”
She argued: “Segregation is going to be expensive no matter how you do it, [and] requiring segregation on top of another form of financial protection, and possibly a variable Atol Protection Contribution [APC], is additional complexity and is going to be costly.”
Jordan added: “There could be wider impacts depending on the level of segregation and allowances around pre-payments.
“A lot of hotels rely on pre-payments. What impact could segregation have on suppliers? There are broader considerations here.”
Sarah Lacy, director of trust provider Serenity Travel Trusts, argued: “Trust accounts, if not run well, can be risky. To plug those risk gaps, there need to be bonds and insurance. My concern is there isn’t the availability of bonds and insurance.”
She added: “There are a lot of administrative hurdles to running trust accounts and they differ depending on the style of trading and type of sales. That is going to be a challenge, particularly for businesses with licensable and non-licensable sales.
“If releasing funds to pay suppliers, businesses would need to identify the part of the payment related to the supplier.
Lacy argued: “There is also the issue of pipeline funds [paid to agents].
“If a principal protects funds in a trust account and takes bookings via an agent, the principal doesn’t necessarily know what money has been taken [by the agent] and whether they need to fund it in the trust account.
“Then there are the costs associated with these administrative hurdles and the cost of independent trustees.
“For larger companies, those costs are going to be proportionately more worthwhile. The problem is at the lower end of the market. Smaller Atol holders would need a collective scheme to make it cost effective.”
Alan Bowen, advisor to the Association of Atol Companies, told the webcast: “To have an effective trust account, you need effective control. If you can’t be certain the right amount of money is in the account daily, there is a risk it will go wrong.”
Bowen and Jordan were responding to proposals in the CAA’s ‘Request for further information‘ on Atol reform, issued in January.
The CAA has extended the deadline for submitting responses to its request for information by a week to this Friday, March 31.
More: Special Report: CAA asserts case for change on Atol