Truly Travel failure ‘shows a real flaw’ with trust account model

The failure of Teletext Holidays parent Truly Travel “shows a real flaw” with trust accounts and could prove “a seminal moment” for the industry.

That is according to Alan Bowen, legal advisor to the Association of Atol Companies, who noted the company operated trust arrangements through the Travel Trust Association (TTA) but this had not enabled it to refund customers for cancelled holidays during the pandemic.

The Competition and Markets Authority (CMA) launched legal action against Truly Travel last month over £1.2 million in unpaid refunds and Bowen pointed out: “All the major trust account systems operate on the same basis.”

The TTA confirmed the termination of Truly Travel and subsidiary Alpha Holidays’ membership at the end of last week and liquidators have been appointed.

TTA Travel, part of The Travel Network Group (TTNG), said it would fulfil outstanding Atol-protected bookings. TTNG chief executive Gary Lewis said: “We’re working with the company to support existing customers. Holidays will go ahead as planned and bookings are financially protected.”

But Bowen said: “The failure may well be a seminal moment in the development of trust accounts.”

He pointed out the “TTA-administered trust account should in theory have had enough money to refund, but presumably hasn’t. The reason is the system of allowing payments out to suppliers at the time of booking and then insuring against their failure.

“All the major trust account systems operate on the same basis. Only Travel Counsellors and Trailfinders hold all customer money until the travel is over [and] can guarantee funds are available – a scheme virtually no one else could live with.

“It calls into question whether trust accounts that allow you to dip in to pay suppliers work.”

He argued: “What does this say about the CAA view of trust accounts? It would have been better to have a bond in place.”

A recent CAA consultation proposed moving the sector wholesale to segregating customer payments, with incentives for operating trust accounts. Detailed proposals are expected early next year.

The CMA took court action against Teletext Holidays last month seeking that “outstanding refunds be immediately repaid” after receiving undertakings which it said the company had not met.

Bowen warned the amounts owed “may be higher than £1.2 million”.

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