Trailfinders submission to the PTR review

Introduction

The Principles behind the PTR’s, to ensure consumers receive what they have booked, or failing that they are refunded and, in some circumstances, compensated, is largely sound. We could protest the fairness of having to refund holidays when Gatwick is closed due to a drone, which is surely the CAA’s responsibility, but the PTR’s are largely right.

The problems with financial protection in travel however are significant and this call for evidence lacks the ambition to address them. On the contrary it raises the prospect of protecting fewer people by removing domestic packages and lower cost holidays.

Proper financial regulation in travel has been defeated by a lack of effort by the regulators and successive governments as well as the self-interest of some in the travel industry. The public’s opinion is the one that matters, not the travel industries. Which?’s recent paper on the PTR’s provides valuable insight.

Reviewing the PTR’s separate to the ATOL consultation and taking them in potentially different directions is nonsensical given that all ATOL bookings are governed by the PTR’s. Further this PTR call for evidence suggests removing LTA bookings from the PTRs, adding to the majority of travel bookings such as Flight Only and DIY bookings where consumers are woefully protected. In 2018-19 ‘AIR’ was looked at separately to other travel, before Peter Bucks’ report was dropped into a dusty drawer. Travel should have one body responsible for all travel, to make this simple for the consumer. The DBT were told this when they held Zoom consultations with the travel industry prior to drafting this call for evidence – why have they ignored this?

ATOL reform appears set to end embezzlement of Client money for package bookings which contain a flight. This is long overdue and will bring a part of travel in line with the financial standards that are common and expected by consumers in the UK. Bizarrely the PTR review is silent on embezzlement.

Why does selling a package to France by plane require a licence, ATT insurance backed by a tax-payer guarantee, monthly reporting, an annual auditor report and potentially keeping client money in Trust or Escrow – but a similar package by train has none of these safeguards and no policing? A bond covering 10% of turnover is totally inadequate and even this is in effect voluntary, as no policing exists for non-ATOL packages.

All package bookings should be covered by ATOL (TOL), which this review should address. Doubtless the Treasury is not prepared to be on the hook for more open-ended liability, but if Client pre-payments are protected in escrow or trust the Treasury liability falls away. The history of ATOL failures shows clearly that those with Trust accounts cost the ATT and taxpayer nothing, whereas those with bonds have cost the ATT hundreds of millions. Move all packages under ATOL and at the same time reduce the taxpayer/Treasury liability.

There is then a further argument to be had as to whether Flight only bookings are also covered by a version of ATOL (limited to financial protection and repatriation).

Three simple principles can address most of the questions posed by the ATOL, PTR and AIR consultations/reviews and address the Treasury liability issue:

1) Where payments are made in advance of travel that money must be safeguarded in trust or escrow. (Accepting a transition period with variable APC fees based on risk)

2) There should be one umbrella organisation that covers all travel protection, giving consumers one point of reference. This organisation must also be responsible for licensing and enforcement.

3) If two different travel products are booked with the same travel organiser prior to travel it is a package. KISS.

The proposals in this PTR call for evidence would enable more Client money to be embezzled by Travel Organisers with fewer travellers protected. Backward steps.

Trailfinders are proof of concept that safeguarding all client payments until they are home (whether ATOL package, non-ATOL package, flight only or hotel only) is not just do-able, but that doing the right thing can be the basis of a profitable business.

Definition of Embezzlement (From Investopedia):

‘Embezzlement refers to a form of white-collar crime in which a person or entity intentionally misappropriates the assets entrusted to them. In this type of fraud, the embezzler attains the assets lawfully and has the right to possess them, but the assets are then used for unintended purposes’

Below in blue are our answers to some of the 32 questions:

1. What consumer protections are particularly important for those holidaying in the UK and why?

2. Do you think that:

a. All domestic-only arrangements should be exempt from the Regulations; or

b. Domestic-only arrangements that do not include travel should be exempt from the Regulations; or

c. Domestic-only arrangements should continue to be in scope of the Regulations as they are now?

Please provide an explanation for your answer, citing any relevant data where possible.

C. Given the PTR’s only protect a minority of holidaymakers currently, the aim should be to protect more, not less. Whilst the regulations for non-ATOL packages are not policed, removing UK packages will encourage the unscrupulous to enter the market and the previous scandals like pre-paid Christmas hampers and pre-paid Funeral arrangements will be repeated. Why is travel the only major industry where it is still legal to embezzle client’s money?

3. If you offer or have considered offering domestic packages, what impact does the current regulatory regime have on your decisions to put together domestic packages?

None. This incorrectly implies the current regulatory burden is high, which is untrue.

4. Would removing domestic packages from the scope of the regulations support businesses to:

a) offer more choice?

b) offer lower cost options?

c) both?

d) neither?

e) something else?

Please explain your response, setting out how and to what extent this reform could lead to benefits or detriment to business.

E. In the short-term there may be more choice as those that seek to embezzle client funds enter the market. It would ultimately be to the detriment of the consumer.

The recent Which? report on this call for evidence stated consumers felt that Domestic packages should not be excluded from protection. Which? reference Citizens Advice whose data shows there are more complaints about UK Holidays per year than holidays abroad.

5. What impact do you think the pandemic has had on demand for domestic holidays? What attitudes and behaviours do you think consumers might have towards domestic packages going forward? Please cite any evidence. Setting a minimum cost threshold for rules to apply.

No. This suggests that if you are not buying an expensive holiday, you don’t deserve protection. It is morally wrong to implement a system where a cheaper priced holiday does not support a consumer’s rights.

a. the price of the package over all travellers; or

b. the average cost per person; or

c. another measure of value (if so, please describe). Please explain.

N/A. See question 6.

8. Do you think the regulatory position on linked travel arrangements should be

a. kept as it is; or

b. simplified; or

c. incorporated into the definition of a package; or

d. removed from the Regulations? Please explain your answer, outlining potential impacts on businesses and consumers and any evidence that informed your position.

C. Just because you book a flight and hotel a day apart, it is still a package. This loophole gives an opportunity for the unscrupulous to sidestep PTR obligations. Removing them from regulations entirely makes it even worse for the consumer.

This hole needs closing, not dynamiting into a larger one!

If two or more different elements are booked prior to departure, with the same operator then they should be a package. This makes this messy area of travel protection slightly less confusing for the public.

LTAs should be a package; therefore Schedule 8 of the PTRs would be irrelevant.

11. Which information requirements do you think could be removed or reduced whilst still ensuring consumers receive the information they need?

N/A

12. What would be the impact on businesses and consumers of simplifying the information provision requirements for linked travel arrangements?

If the LTAs became packages the consumer would benefit from the clarity and more travel arrangements being protected. Trailfinders already treat these bookings as packages so as not to short-change our clients.

13. To what extent would increased flexibility in insolvency protection help businesses to meet their obligations under the Regulations?

The lower you set the bar, the easier it is to step over it. The bar is far too low: Travel Organisers are already allowed to embezzle Client’s money. This review should ensure Client money is safeguarded in escrow or trust. What is permitted in travel with Client funds would place Solicitors, Funeral Directors and Bookmakers in Prison. Other industries and their regulators have learnt historic lessons, the Travel Industry seems unable, or unwilling to do so.

14. Would there be any challenges associated with increased flexibility in insolvency protection, particularly for compliance and enforcement?

Yes, it makes a bad regime worse. When Travel companies fail - the shortfall would be greater and outside of ATOL protected bookings there is no fund to bridge that gap meaning the consumer will lose their holiday and their money.

15. In what other ways could the cost to package travel businesses of securing insolvency protection be reduced without compromising consumer protections?

There is no cost in safeguarding Client money in escrow and very little cost to keeping it in trust. The only issue is for those under capitalised companies that have misappropriated Client money and use bonds, or insurance to bridge the gap in their capitalisation. Trailfinders safeguard all Client payments in trust until the Client is home regardless of whether it is a package or not, regardless of whether it is ATOL or not: As the only company to do this we can assert this is a successful model with minimal administrative costs and plenty of upside.

16. Does the inclusion of ‘other tourist services’ in the Regulations serve an important purpose?

Yes, elements like Car Hire and Motorhome or sports tickets can be expensive and warrant protection.

17. Is there sufficient clarity about when an ‘other tourist service’ will form part of a package?

No. There are too many exceptions, qualifications and loopholes.

We should remove the necessity for the combination of travel elements, when talking about an ‘other tourist service’, to have to be ‘an essential feature of the combination’ or ‘a significant proportion of the value of the combination’.

Yes. Keep it simple.

No, it is not clear. The term should be removed as a qualification.

20. Do you think the definition of traveller should be changed? If so, how and what impact would this have?

No. Watering this down will be to the detriment of the consumer.

21. What do you think would be the impact of removing all business travellers from the definition of traveller? Further Technical Changes Redress from Third Parties

It is reasonable to remove business travel, as businesses are used to managing the risk of funds paid to a supplier. However, it is not uncommon for a trip to be a mixture of business and holiday, how is that classified?

22. If you are an organiser of package travel, have you been able to obtain effective redress from third parties?

This is a non-issue. Even in the pandemic Trailfinders recovered 99.9% of money from suppliers where we had pre-paid. Travel is about a travel organiser’s relationships with both consumers and suppliers. If you choose the correct suppliers, then redress on behalf of consumers is never a problem.

23. Have you had any particular or recurring problems in obtaining redress? If so, please provide details.

No.

24. What would improve package travel organisers’ ability to obtain timely and effective redress from suppliers?

This is matter for their own contractual agreements with suppliers and is a non-issue for regulators.

25. What would be the impact of removing Regulation 29 from the Regulations? Whether rules should allow for extenuating circumstances.

Under the PTRS, travel organisers are liable for the performance of travel services that make up a package. This is good and right for the consumer. However, travel organisers should also always have the right to seek redress from third parties if the failings of the third party contributed to the payment of compensation. As soon as you allow suppliers to rationalise a reduction in responsibility for the consumer, some will do so.

26. What are your views on how well the Regulations operated during the COVID-19 pandemic?

The regulations were fine. The issue was that the CAA and ABTA endorsed the use of IOU’s to Clients in place of cash refunds to help those companies that had already misappropriated and spent Client’s money. Not all consumers were given the choice and hundreds of millions of pounds of these IOU’s/vouchers/RCN’s issued by Airlines and Travel Organisers have still not been used. The companies that ignored the legal requirement to refund in ‘cash’ in 7 days (flight) and 14 days (package) have profited from it. Trailfinders were able to issue immediate refunds as Client money was safeguarded.

27. Do you think any changes should be made to the Regulations to account for extreme extenuating circumstances impacting the ability to pay refunds quickly?

No. This was only an issue for Travel Organisers who had not safeguarded Client money. Address this principle, end embezzlement and this is a non-issue.

28. If so, what factors do you think should be considered as part of a definition of extreme extenuating circumstances?

N/A

29. Are there other changes that should be made to the Regulations considering the pandemic and if yes, what are they?

It would be helpful to give more clarity as to when a consumer is entitled to cancel and have a full refund due to advice against travel. Ideally FCDO advice would be the single authority for the UK. There were grey areas in the pandemic when there was government advice against travel, no FCDO advice against travel and planes still operating.

30. What are your views on relaxing territorial restrictions on insurance cover for insolvency protection providers to allow supply by those regulated outside the UK?

A recipe for disaster. There is no way to ensure adequacy in this area if territorial restrictions are relaxed to allow supply by those regulated outside the UK. The risk of allowing companies to choose an insurance policy without approval was seen with the Thomas Cook failure and their Public liability insurance, which left the Treasury and the Tax-payer on the hook yet again.

It would reduce cost and reduce cover. Good for unscrupulous operators, bad for consumers.

32. Are there any parts of the information requirements where you think flexibility is particularly needed to ensure the requirements stay up to date?

Flexibility is not the issue. Safeguarding Clients money and policing the regulations is.