Members’ March bond renewals could prove tough for some. Ian Taylor reports
Recent Abta bond renewals have proved fraught for many businesses needing additional funds to meet consumer financial protection requirements through the pandemic.
So Abta guidance on renewals this March, issued in December, was welcome. The guidance is broad rather than detailed, but gives more information than members are used to about a process that can often appear opaque.
More: Abta accused of ‘moving goal posts’ on bond renewals
Abta chief executive Mark Tanzer has described each member’s bond as “a bespoke calculation”. While acknowledging that bonds have increased during the pandemic, he said: “Bonds went up because refunds have been deferred and needed to be protected.” But he denied Abta had taken a more risk-averse approach to bonds at the renewal last September and insisted this month: “The underlying requirements haven’t changed.” (Travel Weekly, January 13)
However, the guidance suggests the requirements for some members have changed in at least one respect.
The bonds provide protection for non-Atol packages and other non-flight arrangements protected by the Package Travel Regulations (PTRs) if a member fails, as well as ‘pipeline’ money held by retail members (agents) on behalf of tour operators and other suppliers (‘principals’).
They are set to protect the amount of customer money “projected to be at peak risk” during the year.
The guidance notes state: “Abta has had to revise its standard bond calculation approach to ensure members provide bonds of a sufficient amount…Since March 2020, some members have represented a different risk profile to normal. They are holding and collecting different amounts of customer money…with some bookings transferred to future dates and Refund Credit Notes [RCNs] that have not yet been used.”
As part of the bond calculation, Abta generally makes an allowance for credit card bookings, since these are protected by the card companies under Section 75 of the Consumer Credit Act, which reduces the risk to Abta. The CAA makes a similar calculation in dealing with Atol holders.
The guidance confirms: “Abta will apply a maximum of 75% relief on the total amount of payments made directly with UK-issued credit cards by UK customers only…if you are able to provide the percentage of customers [who] are based in the UK and pay with a UK issued credit card.”
Without this information, relief is capped at 50%. There is no relief for debit card bookings.
A senior industry source suggested this represents a reduction on the relief previously offered and could double the bond for a mid-sized business, claiming: “Members will spend the next two months pushing back on this.”
However, an Abta spokesperson said: “While some members may receive less credit card relief than in previous years, others may receive more.”
More: Abta accused of ‘moving goal posts’ on bond renewals