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Top legal newsletter exposes agent deregulation dangers

July 13, 2015 Corporate, Headline News 2 Comments Email Email

egtmedia59Australia’s most respected legal newsletter has questioned the effectiveness of the current self-regulatory accreditation regime (ATAS), introduced by the Australian Federation of Travel Agents (AFTA) in July 2014.

In a front-page lead story in The Justinian, which we have reproduced below with permission, long-established Melbourne lawyer and Justinian columnist, Barry Lane, looks at consumer protection, or lack of it, since the end of national travel agent licensing and the Travel Compensation Fund (TCF) consumer protection scheme that went with it.

The Justinian has been around for 30 years. Coincidentally, the publication was founded at about the same time uniform legislation was first introduced throughout Australia to provide consumer protection for the customers of defaulting travel agents.

The legislation’s purpose was simple – to provide for the licensing of travel agents. That was seen as an important advance in consumer protection, as it was recognised that the incompetence or dishonesty of a travel agent could destroy a trip for which ordinary people had often saved for a long time and which they might never have the chance to repeat.

This sentiment is as valid today as it was 30 years ago – but the abolition last year of the national scheme and the TCF that went with it has removed the protection. Consumer losses from agency insolvencies, following the disbandment of the TCF, are producing negative media reports which, many argue, lead to declining consumer confidence in travel agencies.

Lane warns below that shady characters excluded from the travel industry on fitness or financial grounds over the past 20 years are now likely to drift back in. His forebodings are shared by many in the industry. TravelManagers’ chairman, Barry Mayo, has lobbied passionately from the outset for the industry to offer some form of unambiguous consumer protection. Mayo has always maintained that travel agent deregulation in its current form is a disaster waiting to happen.

A recent spate of agency collapses, involving consumer losses, supports Mayo’s view and poses the question: how many more consumers will be adversely affected before action is taken?

Barry Lane’s article The Justinian follows:


Have a safe trip

Travel tyro trips off with ticket money … Deregulation of travel agents … Judging by the number of defaults, self-regulation may not be a good idea … Red tape cutters busy at work … Barry Lane on the case.

The sinking feeling as free-marketeers deregulate travel agents

NEARLY 30 years ago uniform legislation to provide consumer protection for the customers of defaulting travel agents was introduced throughout Australia.

It was the result of a scheme hatched by the Standing Committee of Consumer Affairs Ministers in September 1985.

The Victorian minister for Consumer Affairs, Peter Spyker (ALP, Mentone) spelled out some of the elements of the Travel Agents Bill, 1986, in his second reading speech:

“The purpose of the Bill is to provide for the licensing of travel agents. This is an important advance in consumer protection, as it is recognised that the incompetence or dishonesty of a travel agent can destroy a trip for which ordinary people have saved for a long time and which they may never have the chance to repeat. 

“The scheme will also involve the creation of one compensation fund to cover all the travel agents in the participating states and territories. The fund represents an important model of co-regulation, because it will be governed by an independent body, which will have an equal number of representatives of government and industry, and two representatives of consumer interests.” 

To be licensed under the legislation travel had to satisfy requirements for financial viability, to be determined by “independent accountants”.

The national licensing and consumer protection scheme operated successfully until the free marketeers and “red tape” zealots brought it down in 2014.

They thought that consumers were no longer in need of immunisation against the racketeers and hucksters who prey on people.

On November 13, 2013, the Victorian Minister for Consumer Affairs, Heidi Victoria (Lib, Bayswater), introduced the Travel Agents Repeal Bill 2013:

“The Bill illustrates the government’s ongoing commitment to remove unnecessary red tape for businesses and promote efficient and adaptable regulation … 

Now, after over two decades in operation, the national scheme has steadily become ill-suited both to modern industry practices and to how consumers purchase travel today.” 

The legislation abolished the 1986 scheme – and the minister gave various explanations: travel is now mainly an online business in which agents increasingly are being bypassed by consumers; cost of compliance with the scheme are too high; international travel agents have entered the market, by-passing the national scheme; and there is too much regulatory duplication.

A self-regulatory accreditation regime under the auspices of the industry lobby group, the Australian Federation of Travel Agents, has replaced the previous regulatory regime.

As Heidi put it:

“The bill will enable travel agents to transition into an environment that is appropriate for contemporary market conditions and existing regulatory coverage. It will also enable an experienced, well-established industry to play a central role in overseeing the activities of its representatives in the absence of more prescriptive regulation.” 

The deregulated model has spread nationwide.

Presciently, travel industry lawyer Steven Lewis warned that “travel agents should be careful what they wish for”. He thought that the free market reforms carried real risks to the travel industry and its reputation.

So what’s happened since the national scheme was abolished?

A couple of agencies in Queensland have gone bust: Travel Rockhampton (an ATAS accredited Helloworld associate agency) and Gold Coast agency Getaway Escapes (not ATAS accredited).

It appears that clients of Travel Rockhampton will be covered by Helloworld, but there is some doubt about clients of Getaway Escapes.

Meanwhile in Victoria, two agencies have gone belly-up: CTS Travel of Altona Meadows (ATAS accredited) has gone into voluntary liquidation with creditors reportedly owed $340,000, and Ace Travel (not ATAS accredited) of Colac under the baton of former president of the Geelong Young Liberals, Jordan Dittloff, 27, closed its doors after he did a runner.

Stranded jet-setters

Tens of thousands of dollars are owed to locals including 32 members of a Scout Group and students who booked their end of year schoolies break in Queensland.

After being on the lam, Jordan surrended to police on June 12 and appeared in the Melbourne Magistrates Court charged with 35 counts of theft. He’s on bail with a committal mention scheduled for September 18.

AFTA Chief Executive Jason Westbury had some helpful advice for Jordan’s loss-suffering former clients. The Colac Herald reported:

“… he could not discuss the Ace Travel situation specifically but suggested people who had paid for holiday bookings by credit card could pursue any loss through their bank. 

‘Our general advice is that if people paid by credit card they should contact their bank and they may be eligible for a charge back, but there’s no guarantee. 

In future if you are in a position to pay with a credit card, there’s a small surcharge but it can be the cheapest form of insurance.’ 

[Mr Westbury] also said clients could contact travel insurance companies to identify what their policy covered.”

What a wrap for the industry.

Dittloff. AFTA says ask the bank to refund the money you paid to Ace Travel

Ace Travel clients have discovered that along with their ticket and accommodation money, insurance premiums paid to Ace Travel might not have been passed on to insurers.

According to The Hun, Jordan’s well respected parents, Sue (a travel agent of 30-years standing) and Michael, said:

“While we as a family take no responsibility for his individual actions, we can only apologise on his behalf and hope that he is found in order to front up to the accusations made against him … 

Those who know our family well will know that these revelations are extremely devastating to our family name, as parents Sue and Michael have always tried to instil honesty, a hard-work ethic and integrity into their three children, leading by example.”  

Jordan, who was welcomed as Colac West Rotary Club’s youngest ever member in 2011, would have applauded the industry being freed from the stultifying “red tape” of compulsory qualifications, licensing and contributions to a compensation fund.

In 2013, Jordan defied the local council and installed new business signs for Ace Travel without first obtaining the requisite permit.

According to the Colac Herald Jordan wanted the council to adopt a system of self-regulation where council officers would “focus on the minority of rogue operators who ignore common sense and fail to do the right thing”.

This will “save council time and money.”.

What has been thrown out with the bathwater? From its 2013 Annual Report we learn that in 2012 the Travel Compensation Fund paid 1367 claims at an average of $3188 per claim for a total of $4.3 million. In 2013, 897 claims were paid out at an average of $2666 for a total of $2.3 million. As at December 31, 2013, the TCF had $27 million in the kitty – a buffer for future claims.

Since its inception in 1986, the TCF has paid 88,399 claims for a total of $62.8 million. That’s some lettuce for a regulated occupation. Think what the losses would have been without the controls of the old scheme.

Where to from here? My prediction is that all those who were excluded from the industry on fitness or financial grounds over the last 20 years, whether formerly licensed or not, will now drift back in.

For consumers, it’s caveat emptor with bells on.

From Barry Lane in Melbourne

Currently there are "2 comments" on this Article:

  1. AgentGerko says:

    What red tape? Having operated an independent, IATA-accredited agency for the past 27 years I can honestly say the work required by the Licencing Board and the TCF was minimal and inexpensive. Most of it we still need to do to keep IATA happy anyway. The alternatives that have been created for us by AFTA entail a lot more work, considerably greater expense, and offer virtually nothing for the consumer.

  2. Michael Horn says:

    I worked across most areas of the travel industry over the past 40 years and believe to have a good working knowledge of the entire industry. In my humble opinion, Australia has a certain bias against travel agents thinking that regulating them solves every other problem in the industry. Well, it doesn’t and the way forward should be thought through before a knee-jerk reaction once again puts an unfair burden on all those who operate their business as prudent business people following the law and paying their tax.

    The wider the protective net is, the better and more cost-effective it will be for everyone involved. The European Union uses an insurance system whereby a fraction of the travel price is levied on each passenger. This can easily be modified to include online bookings as well with the likely exception of bookings made in jurisdictions other than Australia. Also, the cost of such insurance can be kept low as a small excess would help to alert customers to be careful with the selection of their agent.

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