Atol holders delivered a “sceptical” response to the CAA’s suggestion in its Atol Reform consultation last year that segregating payments “may provide comfort to merchant acquirers”.
The acquirers charge Atol holders and agents for processing card payments. The CAA argued that if customer money is segregated, acquirers “will be less exposed to insolvency risk and may make reduced or zero demand for security”.
But when the CAA asked whether mandatory bonding or segregation of customer money “would help negotiations with financial stakeholders”, it found: “Most respondents were sceptical as to whether any of the proposed measures would benefit Atol holders in negotiating better terms with merchant acquirers.
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“Many expressed doubts that any changes to the Atol scheme would lead to a change in merchant acquirer terms [because] the travel industry is seen as high risk due to the CAA directing customers to claim via their credit card.”
Some respondents went further and suggested that by restricting working capital and imposing stricter measures, “merchant acquirers might perceive the proposed measures as increasing their risk”.
Only “a small number” were optimistic about securing better terms. Others reported being requested to provide a security by merchant acquirers “despite segregating monies”.
A majority also rejected a proposal to move to a wholly insurance-based Atol regime as an alternative to reform of the existing scheme.
However, a “substantial number” favoured this option, according to the CAA, although there was “a very different understanding” of what this would mean.
It noted: “Those in favour expressed a preference for the simplicity offered . . . and considered the financial market would offer a fairer approach to pricing risk.”
However, most were concerned “over the likelihood of insurers paying out”.
There was also concern at the cost of premiums, at insurance policies being withdrawn during “difficult economic periods” and in relation to specific risks, and fear that this approach “would dilute the Atol brand”.
Respondents across all groups agreed the CAA should continue to handle claims and repatriation in the event of failures.
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Atol Reform: Industry delivers lukewarm response to CAA proposals