The Travel Compensation Fund has come out fighting as it warned that scrapping the consumer refund scheme and eliminating travel agent licensing could come back to haunt the industry.
While stressing that its submission to the draft Travel Industry Transition Plan was not intended to “suggest or advocate” a decision, the 22-page document spells out what it believes are significant risks in the event of the TCF being axed.
It warned that consumer confidence in the industry may be damaged when a company collapses in a post-TCF world and suggested existing safeguards under consumer protection laws are “impractical, unavailable or too costly for individual consumers”.
“Under the proposed plan, consumers will need to take legal action individually or within a class action to recover lost funds which will be costly, time consuming and unlikely to provide them with financial relief,” the TCF said. “Such legal actions are unlikely to be available, or pointless where the travel agent is bankrupt or otherwise insolvent.”
It argued that if a wholesaler collapses and there is no TCF to pick up the pieces, consumers could well hold the retailer responsible for passing on money which is subsequently lost.
Brand or goodwill damage could result for the agent, the TCF said.
A further damaging implication could see consumers prefer to deal with larger, better known agents who the public perceive as being more financially stable.
The TCF also rejected the claim that payments by credit card is increasing and therefore protecting consumers.
“The use of credit cards is not as common for travel purchases in Australia as may be thought,” it said. “Most recent TCF experience with claims is that credit card purchases are declining in favour of other means of payment.”
Later in its submission, the TCF tackled one of the scheme’s fundamental flaws – that its remit is not wide enough. That could be solved if more travel businesses were subject to licensing and compulsory TCF participation.
While "the TCF cannot unilaterally extend its own coverage", that could be achieved through legilsation.
Should the reform proposals be ratified, the TCF insisted that its $31 million reserves continue to be used to compensate consumers “until the best/alternative scheme is actually implemented”.
In addition, the cash should fund a travel industry ombudsman and to establish a travel consumer advocacy centre which could provide education, advice and help in matters of travel consumer issues.
