Its death knell was sounded at a meeting of state ministers of Consumer Affairs in Adelaide on Friday.
“Current [TCF] arrangements are not satisfactory, with only about a third of affected consumers having any redress under the scheme,” the ministers said in a statement issued after the meeting. They met under the Legislative and Governance Forum on Consumer Affairs (previously the Ministerial Council on Consumer Affairs).
The ministers feel that “fundamental changes in the market” and stronger protection under Australian consumer law has superseded the TCF. They will work to draw up a draft transitional blueprint which will open the topic up for public and industry discussion and consultation, with a final plan to be hammered out at the end of the year. The current scheme will run until replaced by something else – quite what, nobody knows.
The ministers are concerned about value for money. They say it costs more to administer the TCF than the TCF pays out to consumers. This makes the TCF a “significant regulatory burden with declining benefit”.
Membership of the TCF has since 1987 been a prerequisite for holding a travel agents licence in Australia, with the exception of the Northern Territory, which operates its own fidelity scheme. Agents are required to lodge an Annual Financial Review (AFR) with the TCF within three months of financial year-end. Meeting TCF demands and criteria relating to trust accounts, working capital, net tangible assets and net capital and reserves are fundamental to trading as an agent.
One of the TCF’s shortfalls is that it does not cover the failures of principals, as many unhappy consumers learned when Air Australia went bust. Yet the TCF has done a lot of good. The strange case of a travel agent at Darwin’s Travelscene American Express and the disappearance of AUD200,000 or more of customers’ money last year provided an example of what happens outside the TCF. The maverick NT did not join the compensation scheme, leaving the NT a particularly bad place for consumers to be stung in such ways.
Much of the difficulty in founding a national travel compensation scheme in Australia is the cumbersome and expensive necessity of having to gather all the state and territory Consumer Affairs ministers before proceeding. They will next meet in Sydney towards year-end.
Interested parties have already been lobbying on the TCF and the sort of scheme or laws that might replace it. The Victoria-based Consumer Action Law Centre last week echoed the Consumers Federation of Australia, CHOICE and the Queensland Consumers Association in calling on Australia’s Consumer Affairs ministers to consult with all stakeholders before making a decision on the future of the TCF.
It seems the ministers didn’t wait.
Gerard Brody, director of policy and campaigns at Consumer Action says the TCF should not be modified or abandoned without consulting consumers.
“The fund is currently worth around AUD30 million and was designed to provide consumers with compensation when a travel agent collapses – so, as far as we’re concerned, consumers should have a say in what happens to it.”
Brody said Consumer Action’s legal advice phone line has received calls from Victorians whose travel plans have been thrown into turmoil after the collapse of travel agents or airlines and was well positioned to offer an insight into the consumer experience.
“Ultimately, the fund is paid for by consumers who purchase travel services from travel agents, so it’s only right that they’re properly considered before a decision is made.”
Consumer watchdog CHOICE is also urging caution. Before the latest meeting of ministers, CHOICE was urging them to:
• Make no further decisions about consumer protection in the travel industry “until the veil of secrecy has been lifted”;
• Make sure all measures being considered are published for community consultation; and
• Actively seek the involvement of consumer representatives.
“CHOICE has been involved in reviews of consumer protection in the travel industry for decades, and our message to ministers is that consumers must continue to have a voice on these issues,” declared CHOICE head of campaigns, Matt Levey.
Written by Peter Needham