Atol Reform consultation: Two financial protection experts explore the ramifications for travel businesses Continued from page 48
seven days, but the law has been ignored. At the same time, we’re obliged to make repayments in 14 days. There has to be a quid pro quo.” Bowen insisted: “I’m all for
consumer protection. [But] look at the four big failures – the first a year after the Atol scheme was set up [in 1973] when Clarkson’s went bust, ILG in 1991, Monarch a few years ago and Thomas Cook. The thing they had in common was they all had their own airline. A huge repatriation was required. That isn’t the case for 99.9% of seats. “There is a real danger of
throwing the baby out with the bathwater. I’m not against trust accounts, but they are not a cheap version of financial protection.” However, Daniel Landen,
managing director of Protected Trust Services, said: “It seems inherently unfair that good travel businesses are perpetually paying out to fund the failures of poorly run travel businesses and that is being looked at now in a serious way. “It’s inevitable the industry is
going to move towards separating client funds. A separation of client funds from working capital makes a lot of sense.” Landen argued: “Thomas
Cook and Covid have highlighted the need to separate working capital from consumer funds. Small travel businesses may be petrified of this. They don’t need to be. There are a lot of options. You can find the right model to allow you to trade, lower card charges and work on margin rather than consumer funds.” He insisted: “It’s going to
happen. It’s a challenging time. [But] there is never going to be a great time for this conversation.”
Card acquirers ‘in favour of shift to trust accounts’
Card acquirers are pushing travel businesses towards trust accounts “sooner than the CAA”, according to Daniel Landen, the managing director of Protected Trust Services. Speaking on a Travel Weekly web-
cast, Landen said: “A lot of businesses will be in the trust environment before the CAA pushes them into it.” The current CAA consultation
on Atol Reform suggests segregating payments “may provide
comfort to merchant acquirers”. Landen argued: “Merchant
acquirers don’t like travel. They don’t want to work with bonding. They want a separation of client funds. “Underwriters are looking at
travel saying ‘We don’t want to do that’. Suppliers are saying, ‘If you don’t have a separation of client funds, we need you to pay us as soon as possible’.” He insisted: “A trust account ticks a lot of boxes.” Association of Atol Companies
legal advisor Alan Bowen agreed there is pressure from merchant acquirers, saying: “In the last 12 months we’ve seen a number of merchant acquirers have a panic attack about the travel industry.”
“Merchant acquirers don’t like travel and don’t want to work with bonds. They want a separation of funds”
But he added: “I found 17
interested in moving into travel as opposed to moving out.” Landen said: “I don’t know 17,
and the ones I do know are asking for huge rolling reserves or cash deposits. You’re better off going to a trust account in that scenario. “Card acquirers are pushing
people towards trust accounts maybe sooner than the CAA.”
‘Many firms segregate payments without trusts’
Many travel businesses already segregate customer payments without operating trust arrangements, Alan Bowen, legal advisor to the Association of Atol Companies (AAC), has confirmed. The current CAA consultation
on Atol Reform proposes to make segregation of client payments, most likely through a trust account, a condition of holding an Atol licence. 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. “For large Atol-holders, the
CAA already says, ‘We expect 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
46 15 JULY 2021 Alan Bowen
has to be in a separate trust account because the costs of trust accounts are substantial.” Of the Atol Reform proposals,
Bowen said: “The CAA is saying either you can’t use any of it [the customer money before travel] or the vast majority has to stay there.” 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 get consumer confidence back with a separation of customer funds.”
travelweekly.co.uk
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