News

Travel firms ‘don’t need trust accounts to segregate’ client cash

Many travel businesses already segregate customer payments without operating trust arrangements, in partial alignment with CAA Atol reform proposals.

That is according to Alan Bowen, legal adviser to the Association of Atol Companies (AAC), who warned the cost of trust accounts “can be substantial”.

The current CAA consultation on Atol reform, due to close on August 15, proposes making segregation of client payments a condition of holding an Atol licence – most likely through a trust account.

The consultation document makes clear the CAA wants to move away from a situation where “many businesses are reliant on customer money as a source of working capital”.

But speaking on a Travel Weekly webcast – in a personal capacity, not on behalf of the AAC – Bowen said: “A lot of people already separate money.


More: Travel firms ‘fighting for freedom’ in sector fraught with challenges – Advantage chief

Travel firms ‘must break habits’ to counter plastic pollution

Target urges travel firms to avoid making ‘misleading booking claims


“For large Atol holders, the CAA already says, ‘We expect to you to sit on around 70% of customer funds you’ve collected. They expect tour operators to ensure funds are there, but not that it all has to be in a separate trust account.”

Bowen noted: “The costs of trust accounts are substantial.”

In the Atol Reform consultation, Bowen explained: “The CAA is saying either you can’t use any of the customer money [before travel] or the vast majority has to stay there [in the account].”

He insisted: “I certainly don’t agree with using customer money for marketing or paying VAT. Clearly a few have done that.

“[But] look at the number of failures each year. There are very few and most occur because companies haven’t many bookings. Six of the last seven failures had less than 100 bookings. That is why they failed.

“Occasionally, you’re going to find a fraudster and the travel industry has been a little too easy for fraudsters in the past, but that is not the case now. The CAA has sophisticated monitoring.

“The vast majority of people would be foolish to spend money they collect from clients on things other than clients.”

However, Protected Trust Services managing director Daniel Landen argued: “A lot of travel businesses have used consumer funds to pay for things other than holidays. Our members don’t do that. We need to start moving as an industry to a separation of customer funds to get consumer confidence back.”

The Atol Reform consultation was due to close on July 30 but has been extended to August 15.

More: Travel firms ‘fighting for freedom’ in sector fraught with challenges – Advantage chief

Travel firms ‘must break habits’ to counter plastic pollution

Target urges travel firms to avoid making ‘misleading booking claims

Share article

View Comments

Jacobs Media is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.