Current legislation
around how companies should protect their customers' money is extremely complex
and in the light of the debate that the demise of Weekends Direct has created I
thought I would share what I have learned in making sure that we are fully
compliant.
Firstly I would like to
caveat any advice I give that you should use this as a guide and I would
recommend that you get all details confirmed by your lawyers, and if they are
not experienced in travel I would suggest you speak to one that is as their
experience will save you time and money - I would recommend ours but not sure
what the rules for doing that are here!
When do I need to protect
my customer's money?
If you sell packages to
the general public then you need to protect their money. So what is a
package? Here is the relevant
description from the Package Travel Regulations (PTR's) that explains it:
"package" means
the pre-arranged combination of at least two of the following components when
sold or offered for sale at an inclusive price and when the service covers a
period of more than twenty-four hours or includes overnight accommodation:-
(a) transport;
(b) accommodation;
(c) other tourist services not ancillary to
transport or accommodation and accounting for a significant proportion of the
package.
You can read the full Regulations
here
How can I protect my
customer's money?
If you are selling a
package you will need to ‘provide sufficient evidence of security for the
refund of money paid over and for the repatriation of the consumer in the event
of insolvency.'
This can be done by membership
of a recognised body (e.g. ABTA or ATOL) also referred to as Bonded, Direct Insurance
or holding Monies in Trust. You can
again read full details in the PTR's.
In terms of where you can
get protected, here are some suggestions of where to start:
ABTA - they will
financially protect your customers in the event of failure in return for a bond
that you provide them., This bond is worked out as a % of your turnover and is
normally in the form of an insurance policy in favour of ABTA or guarantee from
your bank. It is likely that you will need sufficient security in order for
your bank to provide a guarantee in favour of ABTA. You can also be a member of ABTA if you can
prove that you have sufficient insurance in place that directly insures your
customers against your failure, see below.
TTA (Travel Trust
Association). They will require that you
operate a trust account that is independently administered by them ensuring
that customers' funds are only released to you on completion of the customers'
holiday. Furthermore, you will also need
to pay a fidelity insurance that will financially protect your customers in the
event that money is not in trust as a result of error or fraud. This will though tie up your cash flow as any
payments from customers will not be released until after they have travelled.
ATOL. If a package includes a flight then you can
use an ATOL licence to provide protection. ATOL licences can be obtained from
the Civil Aviation Authority (CAA). An ATOL licence is similar in operation to
the protection provided by ABTA and you will similarly need to provide the CAA
with some sort of security e.g. a bond or guarantee. Please note though that an ATOL licence will
not protect any packages that do not have a flight in them.
You can also speak to
your insurance broker to see if they will provide you a specific policy to
cover your customers directly in the event of your failure. This is not a popular market so suppliers of
this insurance are few and far between and it is extremely expensive.
I hope I have made it
clearer when you need to provide protection and how you can provide it, if not
please feel free to post any questions.
I will also make another post for consumers and how do they know if
their money will be protected.
