p4 news May15 Mike 13/5/09 22:06 Page 4
news
15.05.2009
CLAIMS HANDLING.
Could CAA stance
Credit card firms
aid Republic case?
angered by travel
THE SCRAMBLE to avoid paying Freedom
Direct Holidays customers is damaging public
confidence in the industry and angering credit
Lee Hayhurst.
GUIDANCE issued by the CAA on C
O
Atol Protection Contribution brought cards firms, it has been claimed.
in to replenish the indebted Air TTG understands one credit card company is
Atol refunds for customers of failed
STO
VER
retailer Freedom Direct could be R
Travel Trust Fund. This fund is now so furious customers are being directed to it
Y
heading for bankruptcy following the that it has threatened to start regarding Abta
used to defend Travel Republic against collapse of XL Leisure Group last members as more high-risk than non-members.
claims it broke the rules. September if APC is not increased to £3. Alan Bowen, a legal expert at AGB Associates,
The leading online retailer is facing A consultation has started. blamed the mess on the successful court
prosecution by the CAA on 20 counts of “The CAA wants it both ways,” said one retailer. challenge two years ago by Abta against the
breaking the law by selling package holidays “Last year it was saying if it looks and barks CAA’s guidance on packages.
without a licence. A second preliminary hearing like a package, it is a package; that was when it This was seen as giving retailers the green
is due to take place on Wednesday. wanted as many £1s in as possible. Now, when it light to put together holiday components
The CAA previously insisted government has to pay out, it’s in the CAA’s interests to say themselves without becoming an operator and
guidance issued last year made it almost you don’t need an Atol for that sort of business.” sell them outside of the Atol regime.
impossible to legally sell separate components A CAA spokesman said the guidance it issued A former head of legal at Abta, Bowen said the
of a holiday together without a licence. was intended solely to funnel customers’ claims Freedom fallout would be felt most by Abta, who
But in clause 3 of its own guidance to clients of to the right place. He said he would be “sur- he claimed should be handling most of the claims.
Freedom, which had an Atol, it states it will not prised” if it was considered to have set a prece- Freedom’s Atol bond was for just £750,000
pay out for clients booked on split contracts. dent that could be used in court and insisted the and with the CAA operating on the principle of a
Leading travel accountant Chris Photi Travel Republic case will “bring more clarity”. 10% multiple, that would account for £7.5 million
described this clause as “unprecedented” and “It’s vital for the public to know if they are of its business.
claimed it appeared to contradict its stance covered or not. Fundamentally, our line is to ask However, Freedom’s latest accounts put its
against Travel Republic (see comment, below). your agent,” said the spokesman. annual turnover at £70 million, Bowen said.
Abta has estimated 75% of claims from Free- “It’s going to come back and bite Abta. If the
dom’s 10,000 customers with forward bookings CAA is clear what Freedom was selling was not
will be dealt with by credit and debit card firms. Abta alerts MPs: Abta development director Atol packages, it appears to be agency business.”
TTG has been told that many retailers, like Andy Cooper told MPs on a travel select com- Abta said it operated on the basis that it is the
Freedom, were also pressured to get Atols to mittee this week that the consumer protection consumer protecter of last resort.
cover business that they have since been legally mess could get worse. He said most consumers It said the Freedom collapse did not expose
advised did not require a licence. wrongly assume they are protected, and that the new holes in protection but did present issues
On April 1, 2008, bonding was effectively big two were considering “unbundling” their “not because of the nature of its business but
scrapped for Atol holders and a £1 per person products, which would create “more confusion”. more to do with the scale”.
Comment Chris Photi, White Hart Associates
The CAA is currently prosecuting this sector’s If arrangements should be licensed, and
THE FAILURE of Freedom Direct Holidays, the market leader, Travel Republic, on the basis that were sold by Freedom that had a licence, then
first one of the new-age “split-contract retail- flights sold at the same time “in combination” should not the consumer be paid from the Atol
ers”, will be a watershed case for protection. with other components should fall under Atol. bond or the ATTF?
Only when the paperwork is sifted and the However, Freedom appears to have sold Effective consumer protection is
complex contractual positions fathomed will identically and had an Atol, yet the CAA says it is shrinking. How can that be a satisfac-
regulators, professional advisers and trade “unable to consider claims in” these “circum- tory structure to move ahead with?
bodies get to grips with the nightmare reality stances as there is no evidence of a contract What will emerge from this mess is a
that consumer protection has become. with Freedom for the provision of air travel”. radical review of consumer protection.
04 15.05.2009
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