'Lack of clarity': Abta questions CAA's rationale for Atol reform
James ChappleThe CAA’s rationale for reforming the Atol scheme "lacks clarity" Abta has said in its response to the CAA’s latest call for evidence on its proposals.
The association published its full response on Friday (31 March), reinforcing comments made by director of membership and financial protection Rachel Jordan to TTG earlier this month.
Writing for TTG’s latest Big Question on whether it was time to reform the Atol scheme, Jordan said there should be a range of solutions to suit all Atol holders, adding Abta was opposed to mandatory segregation of customer monies.
Abta said it had consulted extensively with members during the six-week call for evidence, as well as the financial services industry – including banks, insurers, merchant acquirers, bond providers and trust providers.
"One of the points Abta has made repeatedly, including in its formal response, is the lack of clarity on the rationale for reform," said Abta on Friday. "Abta says the Covid-19 pandemic demonstrates resilience in the sector is strong and the Atol scheme stood up well during this time, so questions what the reforms are trying to achieve."
Another key criticism from Abta was the CAA’s failure, so far, to evidence any alignment between the various government departments involved in Atol reform, and any alignment with separate reform of the UK’s package travel rules.
Abta’s comments follow feedback earlier this week on the reforms from the Association of Atol Companies, which said in their current form, the CAA’s proposals would increase costs and complexity for every Atol holder.
Here are Abta’s six main points of contention with the CAA’s proposed reforms, detailed in its response to the call for evidence.
Alignment
"Alignment is necessary between the Department for Transport (DfT), Department for Business and Trade, and the CAA. These government departments and the CAA need to work together to ensure there is consistency between the financial protection arrangements available in respect of flight and non-flight packages. With both Atol and the Package Travel Regulations (PTRs) under review, there is an opportunity to ensure an aligned approach which would help reduce regulatory complexity and reduce cost for travel businesses."
No ’one-size-fits-all’ approach
"Abta members remain very strongly in favour of having a range of financial protection methods (i.e. bonds, insurance, and segregation) available to travel businesses to meet their regulatory obligations. A one-size-fits-all approach will not work and is not appropriate, and this is a view which is shared by financial services providers."
Customer monies
"There is large-scale opposition to mandatory segregation of customer monies, whether by way of trust account, escrow or client account, across the UK travel industry. There is also skepticism about the ability of many businesses, especially, though not exclusively, SMEs, to adapt to any requirement to ring-fence customer monies given the nature of travel business – with many suppliers requiring payment for services, like hotel rooms, up front."
Bonding support
"Bonding remains a popular form of financial protection. Many members report it is the simplest and most cost-effective method of financial protection available for their business. It is also worth noting that while, during the pandemic, the bonding market narrowed, it is expanding once again with more options available."
’Lack of clarity’ on variable APC
"There is a lack of clarity about what the CAA is trying to resolve by introducing variable APC (Atol protection contributions) and a concern variable rates could distort the marketplace. Members have also raised concerns around the additional complexity that variable APC will introduce into the Atol scheme. While there is some support for a variable approach to the APC by some members, it is difficult for members to provide constructive feedback on the CAA’s proposal to introduce a variable APC without having any understanding of how the CAA believes this would work in practice."
Existing protections
"Section 75 protection and chargeback rights need to be taken into account as part of the overall consumer protection already in place, which reduces the risk faced by the Air Travel Trust Fund. Many customers pay for their Atol holidays with a credit card, providing them with consumer protection, and this results in fewer claims to the CAA in the event of a failure."
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