TCF set to vanish with agents in dark over replacement
The Travel Compensation Fund (TCF) is vanishing into the sunset, due to be phased out as the primary vehicle for consumer protection in the travel market.
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The ministers feel that “fundamental changes in the market” and stronger protection under Australian consumer law has superseded the TCF.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
Think I must have missed something here …. “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.” I don’t recall ever collecting payment from any clients purchasing travel from us to contribute to the TCF …. I was under the foolish impressin that the TCF was paid for by travel agents (seem to remember paying $10,000 initially) and then annual contributions so that we provided protection for the consumer.
I guess if the consumer is going to be paying for their own protection then we will receive a $10,000 refund when TCF is disbanded …. or will this simply disappear into Governmetn coffers?
Yet another example of the disjointed government(s) that rule our nanny state – the punter should take responsibility for his actions and buy a travel insurance policy that protects him from bankruptcy of suppliers as well as everything else
Since when did customers contribute to TCF?
Echoing the reaction of Sue….. totally correct, TCF initial fee of nearly $9000 was a START-UP COST imposed upon us before we could start trading.
TCF funds are essentially travel agent contributions, therefore I agree with Sue – if the TCF is disbandoned we, too, will be making application for the return of at least the initial set-up cost.
Completely agree with Sue. The consumer has always had the benefit of the TCF if they have booked through TCF agencies, without any outlay from the consumer. Agencies have spent start-up fees & subsequent annual participation fees & auditing/accounting fees ensuring compliance with stringent business practice required by the TCF. Travel Agents have paid – the consumer has not. If a licenced Agency fails, the Agency & the TCF pays – the consumer does not.
Agree with all of the above. And the talk I heard from AFTA at a meeting last year was that our START UP cost would revert to the govt coffers. How is that justified. Hope if that time comes we agency owners will have the backbone and determination to band together to fight for our money back.
Yes, what was that $10,000 initial set up cost for? If it was a sort of bond, then we should be entitled to request a refund!
Are online travel booking sites subjected to the same strict and costly auditing procedures as retail travel agencies? How are consumers protected with online booking sites?