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Published on Wednesday, November 25, 2020

ABTA stance on trust funds will send more companies bust, says travel accountant



 





ABTA will have to change its stance on trust accounts or more travel companies will fail, according to leading travel accountant Chris Photi.

Photi, Head of Travel and Tourism at White Hart Associates, said most companies can no longer afford bonding and those that can are struggling to find an insurer that will provide a bond.

And he accused ABTA of acting in self-interest rather than the interests of its members in its refusal to accept trust accounts.

He said it was seeking to protect the captive insurer which underpins its bonding scheme. Also, he claimed ABTA didn't want to switch from bonds to trusts because its 'major competitor' The Travel Trust Association has trusts as its unique selling point.

In a blog post on White Hart's website Photi wrote: "An increasing move to trust accounts seems inevitable, possibly for the whole industry. It's the only way forward because the bottom line is that there is little alternative."

While the CAA is to conduct a consultation into trust accounts next year, Photi said 'ABTA is not looking so progressive'.

"Intransigence on the part of the CAA and ABTA will simply lead to more failures during this desperate period for the industry," he wrote.


ABTA Director of Membership and Financial Protection John de Vial defended its policy positions.


"On bonding and the relatively small number of cases where bond requirements have increased, that is as a direct result of the members concerned holding more customer money," he said.


"The law requires that the increased value is protected and it would not matter whether that protection comes from bonding, insurance or trusts - the requirement has increased.


"If a Member holds more customer money than normal, either because of refunds outstanding and / or the retention of balances for postponed departures rebooked for next year, then that has to be protected. If the money were held in trust, it would be the same."


On trust accounts, de Vial said it has not accepted or approved them 'for a number of reasons'. But he added it was open to reconsidering its position.


"At the heart of this is the PTRs Regulation 23 requirement that 'all monies' are held in trust until 'the contract has been fully performed'. Very few trust arrangements comply with this requirement," he said.


"This is because most trust arrangements allow for the earlier payment of suppliers from the trust and the withdrawal of a value relation to margin/commission."


Furthermore, regulation 24 recognises there may be a 'lesser sum' held in the trust, but then requires the organiser has 'insurance under one or more appropriate policies' to any shortfall of funds held in the trust, he said.


"The current refunds issue has shown that trust accounts face exactly the same issue as other business models - if the airline has been prepaid and is unable or unwilling to refund - then the money has gone from the business," de Vial explained.


"In addition, Regulation 24 requires there to be an insurance policy in place to cover for repatriation and pre-repatriation accommodation costs. These policies must be without prohibited conditions."


ABTA said a number of reviews will take place in 2021, including PTRs and the ATOL scheme structure.


"ABTA is lobbying for these to be coordinated - a joined up approach from Government," de Vial said.


"We will consult members on all of those issues and that may well include a consultation on the role of trust accounts.


"We are open to reconsider our position, but we will not rush to approve any arrangement that does not comply with the law or provide the equivalent insolvency protection for consumers.


"This crisis is extremely difficult for all our Members, but we will not serve their interest well by jumping or pushing them from the frying pan in to the fire."

Read Chris Photi's full post here.
 

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  • Incorrect

    It is obviously White Hart Associates who are looking after their interests, where as ABTA clearly look after their members and their customers.

    By SUE FOXALL, Friday, November 27, 2020

  • Trust Account simple solution

    As a person I used both ABTA for my old company and TTA for the new company, I can tell you huge differences between the two. TTA is very simple to use and offer excellent value for money, to me they are underselling themselves. ABTA was a very complicated to administrate, going through bonding and all sort of finical documents and very expensive, it was too much headaches.

    By Akin Koc, Thursday, November 26, 2020

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