A leading provider of trust arrangements has raised concerns over the Civil Aviation Authority’s focus on segregation of customer money as its “preferred option” for Atol reform.
Sarah Lacy, director of Serenity Travel Trusts, warned “there is no simple route” to segregating client payments as outlined in the latest CAA proposals.
She said: “Client money segregation is difficult, painful and requires real commitment.”
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Writing in this week’s Travel Weekly, Lacy notes an immediate challenge with card payments, arguing: “Consumer funds should clear into a segregated or trust account as soon as possible after the consumer has paid them. This means having a merchant services provider that does not defer payment.
“Merchant acquirers that defer settlement, take refund and chargeback payments by direct debit and deduct fees before settlement are not consistent with this requirement.”
Segregation also requires companies to hold sufficient cash reserves to cover non-Atol-related payments until these can be moved to a different account.
Lacy notes the trustees of the Air Travel Trust fund, which underpins Atol protection, prohibit the mixing of licensable and non-licensable funds. The trustees also require undertakings from the banks holding segregated accounts and that the funds in them are accessible, meaning they can’t be placed in accounts paying higher interest.
She suggests these requirements together present “a disproportionate obstruction” and imply “a daily reconciliation of the account” to the company’s bookings that “may require significant investment”.
Lacy is also critical of client accounts, the alternative form of segregation outlined in the latest CAA proposals, which would be overseen by a company director and validated by an Atol-reporting accountant.
She notes the 2018 Package Travel Regulations (PTRs) require segregated funds be managed independently and prevent a director acting as trustee of their own company trust account, pointing out client accounts would be “inconsistent with the PTRs and a step backwards for consumer protection”.
Yet Lacy warns: “The cost of appointing an independent trustee can be disproportionate.”
More: Comment: Why segregating client money is not simple
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