Travellers’ Protection Fund: To Be or Not To Be?

Travellers’ Protection Fund: To Be or Not To Be?

That is the question, among several, that ITTN’s Neil Steedman asked three major travel agents, as well as Pat Dawson, Chief Executive, Irish Travel Agents Association, and Josephine O’Reilly, Director of Finance and Licensing, Commission for Aviation Regulation, in a follow-up to ITTN’s recent survey of travel agents (see for details).

But first, let me share this pessimistic observation offered by one agent who responded to that survey: “Nobody really cares and everybody who should be seeking to improve things will do everything they can to frustrate any effort to do so. Civil servants, regulators and politicians usually start a meeting with the conclusion already made and then proceed to talk for ages. In the end, the result is the same: nada. The small people of Ireland and small micro businesses are of absolutely no concern to anyone. It is all about looking after oneself, having an easy life, never doing anything that might expose you to making a mistake (no decisions and no action = no mistakes), and having a total disregard for doing the right thing.”

If they are right (and perhaps they are – I came to similar conclusions after banging my head against the walls of the Dáil and the Department of Foreign Affairs for 30 years on human rights issues) then my time spent preparing this article has perhaps been wasted, but let’s retain a sense of optimism, justified or not, and proceed to ask some important questions currently of interest and concern to the Irish travel trade.

Is any legal action being taken against Lowcostholidays, in any country?

One agent replied: “I am not aware of any, but questions still remain unanswered and people walked away lightly. The whole unfortunate episode has undermined the roles of both the CAR and the ITAA.”

Another said: “I have no idea what is going on. Someone signed off and submitted false information to the CAR. That is pretty clear to everyone. Is there no sanction or has no law been broken for doing that to a State Regulator? There needs to be consequences for this type of illegal activity – it was willful fraud.”

The third agent replied: “I am not aware of any. The CAR’s record in legal action against offenders has been abysmal. They seldom prosecute and when they do they spend a fortune on big firm legal fees. I don’t think they have taken action against anyone in years. In fairness, the legislation is so bad, and has been so distorted by European laws, precedents and directives that the CAR don’t seem to know what their role is any more. They have my sympathies in that, but holding on to a licensing regime that is not fit for purpose may ensure their continued existence but is not producing a worthwhile outcome and comes at a price to SMEs.”

However, Pat Dawson said: “UK authorities may be taking legal action” and added: “ was an ITAA member but we did not know their bond. They gave us a turnover for their subscription level, but those are capped.”

Josephine O’Reilly said: “We are aware of investigations being carried out by the Administrators of the company (Smith & Williamson) and are awaiting the outcome of these investigations.”

So let’s wait and see – but I won’t be holding my breath. Nor do I expect the Public Accounts Committee to concern itself any time soon with the ‘loss’ of €3.56 million from the TPF – €3.26 million in compensation for cancelled vacations and €300,000 on administering the payouts.

Where Does the Travellers’ Protection Fund Stand Now?

For the benefit of those too young to remember, in the 1970s the ITAA made a number of submissions to Government requesting legislation on tour operators and also established its own consumer protection fund. Then the collapse of major tour operator Bray Travel in December 1980 finally prompted the Government to act, resulting in the Transport (Tour Operators and Travel Agents) Act, 1982 coming into effect on 30th March, including the establishment of a Travellers’ Protection Fund, which was built up through a levy on tour operators.

The Aviation Regulation Act, 2001 established the Commission for Aviation Regulation to register and issue licences to travel agents and tour operators, and to administer the TPF.

By 2008 the TPF comprised some €7.5 million, but several company failures during the recession reduced this to around €5 million by 2015, and then came the collapse of in 2016. The TPF’s 2017 annual accounts, submitted to the Dáil last December, show that the balance at 31st December 2017 was just €1,586,480. The CAR also revoked the licences of Chadwell Travel / Premier Leisure (in October 2017), Sindaco / Fanfare (July 2018), and Heffernan’s Travel (October 2018).

Pat Dawson told ITTN: “The current balance in the TPF is €1.3 million and I expect a further call of €20,000-€30,000 to be made once the Heffernan’s Travel collapse is all sorted.”

Will the Department of Transport Contribute to the TPF if Further Collapses Require Calls of More than €1.3 Million?

Earlier this month, the Irish Examiner asked the Department of Transport, Tourism and Sport and the Department of Public Expenditure and Reform if the Government would consider reimbursing the TPF if it were the case that holidaymakers would lose out.

A DTTAS spokesperson replied: “The monies of the Fund are managed by the Department of Public Expenditure and Reform. Any proposals to reimburse the Fund would be subject to the approval of the Minister for Finance.” However, they would not say if the DTTAS has a policy in place to seek such an approval to pay into the Fund.

The DPER said it legally cannot pay into the Fund, but can only approve such a proposal from DTTAS should it arise: “The monies of the Fund are managed by the Department of Public Expenditure and Reform. Any proposals to reimburse the Fund would be developed by CAR and DTTAS and would also be subject to the approval of the Minister for PER under the relevant legislation.

“There is no legal mechanism at present for DPER to contribute to the TPF under the relevant legislation, the Transport (Tour Operators and Travel Agents) Act 1982. Such a provision may be considered by CAR and DTTAS in the context of new policy developments.

“The DTTAS and CAR are collaborating on the development of policy options to underpin an efficient travel trade sector and to ensure that consumers continue to be protected into the future.”

So, that’s more wait and see!

Should the TPF Be Replenished by a Levy on All Passengers or a Departure Tax, Rather Than by Travel Agents?

One agent said: “Yes, definitely, but I would not call it a levy or tax – God knows we pay enough of similar additional levies in our day-to-day lives, particularly in energy bills and salaries. I would call it a ‘Surety Payment’ that would be a nominal amount based on a small percentage of the overall cost of the holiday, flight, cruise, etc.”

Another replied: “If a tax could be applied to all passengers leaving the country that would be fair. If the levy is to be made up by the customers of licenced travel agents only that is discriminatory and will be resisted. The CAR won’t put this forward because the Government won’t want tourists to Ireland paying a tax to leave, but it could be applied to all Ireland-originating bookings only.”

The third agent said: “The ITAA have been pursuing this option for years and I can see no other option that could work. Such a levy would only be required for a few years and could then become a revenue stream for the Government. The Director of the consumer rights organisation was once asked at an ITAA meeting why they were objecting to this option as a measure to expand consumer protection and the answer was because they would be against anything that costs the consumer more money – even 50c per person per ticket and even if that meant better consumer protection! I thought that odd for a person tasked with guarding consumer protection. This is the reason that politicians and the CAR have stayed away from this proposal, despite it being the best option by far. They are afraid of a media storm along the lines of them introducing a ‘travel tax’.”

In the ITAA’s response dated 23rd June 2017 to the invitation for submissions on the impact of the new Directive, Pat Dawson wrote: “The ITAA believes that the existing system of bonding and Travellers’ Protection Fund arrangements is no longer suitable, it damages our sector and is unfair to our members. We believe that a new system should be introduced that is equitable, transparent, is paid for by all who benefit from it, the travelling public, and should be focused on areas where the public is exposed. Our travel agents hold the strong opinion that full consumer protection would be assured if a charge of €0.50 was levied at point of origin of ticket issuance on all travel transactions for customers.”

Pat Dawson told ITTN: “The real question now is why should travel agents be bonded in the first place? When the regulations were established in the early 1980s travel agents accounted for 80% of the trade, however the percentage of ex-Ireland travellers protected by CAR bonding is now a maximum of 15%. The public increasingly book flights and accommodation directly with airlines and hoteliers and are not covered by the CAR or the bond. Customers have no protection when they buy travel elements in separate transactions. The Linked Travel Arrangements under the new EU Directive will begin to capture some of these purchases where two elements are bought separately – but only within 24 hours from the same provider. We want to have a level playing field and a levy of €0.50 is the way it should be done – and the TPF would be replenished in one year!”

In its January 2017 Project Update the CAR listed the following suggestions by respondents together with the Commission’s observations: (1) “Charge a fee per passenger booked as opposed to requiring the licensee to pay a considerable premium to an insurance company to fulfil bonding requirements.” CAR: “This appears similar to the approach taken in the UK and one we will consider in the next stage of the project.” (2) “Introduce a levy that can be used to purchase insurance and gradually top-up the Travellers’ Protection Fund.” CAR: The Commission will consider the use of a levy to purchase insurance in the next stage of the project.” (3) “Levy all passengers leaving Ireland.” CAR: While this option is favoured by many respondents, in the view of the Commission it goes beyond the protection of travel agents’ and tour operators’ passengers and as such is not a viable option.”

The CAR added: “In summary, following our recent consultation process, the Commission sees merit in further considering the following suggestions (in addition to our own proposals): (a) Business specific or risk assessed bonds, (b) Redefine licensable turnover, (c) Introduce a passenger levy to replenish the Travellers’ Protection Fund, (d) Introduce a levy/use the Travellers’ Protection Fund to purchase insurance to protect against the high impact, low likelihood events, such as the collapse of Failte Travel or Lowcostholidays. It is important to note that some of these options would require legislative changes and cannot be considered short-term solutions.”

It is interesting to note that, while the CAR sees merit in considering a passenger levy “to replenish the Travellers’ Protection Fund”, its response to the “levy all passengers leaving Ireland” suggestion was that “this goes beyond the protection of travel agents’ and tour operators’ passengers and as such is not a viable option”. This suggests that the CAR is ‘not for turning’ and will not consider as viable any option that is not limited to travel agents’ and tour operators’ passengers. If this be the case, our pessimistic friend at the beginning of this article may well be right after all.

Should the CAR Publish the Bond Values of Licensed Entities?

One agent responded: “Yes, I agree. Transparency leads to honesty, which in turn offers trust and peace of mind to consumers. That should have been a directive from the CAR straight after the Lowcostholidays circus.”

Another replied: “I totally agree. If companies are concerned about exact values being published then it could be done in tiers of less than €1m, €1 – €5m, €5 – €10m, €10 – €20m, etc.”

However, the third agent said: “No, I don’t agree. There are enough rules and regulations imposed on agents already. The CAR need to focus on the big agents and operators as this is where the major hits have and will come from. They should be much more active in their oversight of these companies and much less on the smaller companies, who pose little or no threat. The larger companies have the manpower to provide regular accounts and reports. Small companies do not but, by definition, do not pose an existential threat to any funds. If the CAR had been visiting Lowcostholidays’ offices, or even monitoring their client numbers in some way, they would have seen blatant over-trading. In fact, the CAR (unofficially) queried why nobody told them about it. There is an over-concentration of resources on issuing licences and an almost negligent attitude towards monitoring big companies.”

Pat Dawson told ITTN: “The Department / CAR need to publish a list of ALL entities allowed to trade in Ireland together with their level of cover.”

As regards the suggestion of ‘tiers’, the CAR, in its Project Update of 10th January 2018, included in a list of respondents’ suggestions: “Have a tiered approach to setting bonding, rising from 2% of projected licensable turnover for companies projecting less than €2m, rising to 6% for turnover above €6m”, to which it responded: “The Commission will consider the option of business specific bonding levels in the next stage of the project.”

If the TPF is to Continue, How Long Will It Take to Be Fully Replenished?

Josephine O’Reilly told ITTN: “The CAR appointed Europe Economics to review the bonding of the Irish travel trade industry and we published a report in August 2017 (Bonding of the Irish travel trade industry: Interim Report). The report examined the history of collapses and estimated how much would need to be in the TPF to survive two collapses in quick succession. Once restored to this level, consideration was given to how to sustain the TPF at this level (based on the expected value of annual claims against the TPF).

“Based on an analysis of 2001 to 2016 collapses, a TPF capable of surviving two extreme collapses in a year would need about €6 million at the start of a calendar year. In August 2017, €4.7 million would need to be added to the TPF and could be raised by a levy over a number of years. It is worth noting that raising the funds over a longer timeframe means the TPF remains insufficient for a longer period.

“Once the TPF is restored, the report estimated that a levy contributing €350,000 per annum would be required (based on an analysis of past collapses) and examined how this amount would be raised under different options (B, C, D and E).”

Why is Option E the CAR’s “Preferred” Option?

In her presentation to the Worldchoice Ireland Conference last November, Josephine O’Reilly said that “Option E was the preferred option from Stage 1”, but none of the travel agents and tour operators who responded to the ITTN survey favoured Option E. So was that “preferred” by the travel trade or by the CAR?

Josephine O’Reilly told ITTN: “Option E was identified by our advisors, European Economics, as their preferred option (p47 in our Interim Report of August 2017). When this report was published, we also published a consultation paper asking the travel trade industry for their views. After reviewing submissions, we said we would consult further on a reduced number of options and would include some of the suggestions received from industry. We also said we would not commence this work until the SI was published – to ensure that all necessary considerations are taken into account.”

So E is the option preferred by consultants European Economics, not by the travel trade – and not necessarily by the CAR either.

When Will the Department Publish the Statutory Instrument to Implement the New Package Travel Directive?

The 2015 EU Package Travel and Linked Travel Arrangements Directive entered into force on 31st December 2015 and became applicable EU-wide from 1st July 2018, but Ireland is one of just two EU Member States (the other is Spain) that has still failed to implement the Directive – seven months after the deadline.

Pat Dawson said: “The only logical reason that I can think of for this is that the Department is waiting for Brexit issues to be resolved first.”

In her Worldchoice Ireland Conference presentation on 3rd November 2018, Josephine O’Reilly said that the CAR expected the Department to publish the SI “in the next couple of weeks”. However, she now says: “We do not have an expected date for the SI’s publication.”

It would be prudent not to expect it any time soon, but we live in hope.

Should Travel Agents Opt to be Licensed or Not?

Under the new EU Package Travel and Linked Travel Arrangements Directive, entities established in Ireland will be regulated in Ireland but will not require a licence for business out of another EU Member State, while for ex-Ireland business they may choose to be licensed but will be under no obligation to be so.

For licensed entities, the bond will only cover ex-Ireland business and in the event of that being insufficient the TPF will be accessed. For unlicensed entities, “sufficient evidence of security” will have to be provided, but there will be no access to the TPF.

I asked my three agents if they were clear about the difference and if they thought the CAR and/or the ITAA have done enough to clarify this issue. One agent replied: “I am clear, but for some in the trade it is probably as clear as a foggy day on the Mull of Kintyre! The licensing in its current form is simply not fit for purpose.”

Another said: “We need to separate and define what a licence / registration / financial security means. The licence requirement came about in the 1980s and I am not sure that consumers understand what it means or how it benefits them. In the 1980s the vast bulk of consumers leaving the country were travelling with licensed travel companies, but now only 15% of consumers do that – so is licensing now irrelevant? The CAR need to explain this to the trade and come up with a plan to explain this to consumers.”

My third agent replied: “This is an interesting one and it is also interesting to hear that Gavin Lyons of the CAR has discussed it at a public meeting. It may have also been mentioned briefly in Porto at the ITAA Conference, but it was never explained fully. Obviously, if a licence is not necessary, why would anyone bother with it? Are we going to have a bunch of compliant licence holders competing with non-licensees? On the face of it, if we provide a bond, that is all we need to do. I think the CAR should explain this fully and that the ITAA should also be involved in explaining this to its members. I assume they have a view on whether a licence is required or not – and that would be important to agents.”

Pat Dawson said: “The ITAA currently has 97 members who are all licensed and bonded. The words ‘licence’ and ‘bond’ will disappear in the future and will be replaced by ‘financial guarantee’.”

Josephine O’Reilly said: “The issue of sufficient evidence of security will be looked at on a case by case basis. For example, for UK-based travel agents and tour operators selling packages out of Ireland we have confirmed that their ex-Ireland turnover is covered by ATOL. We do not know how many travel agents and tour operators would opt not to be licensed.”

So Where Do We Go from Here?

It would seem that, first of all, we have to sit and wait for the Department of Transport to get its act together and for it to publish the Statutory Instrument for the new EU Directive.

Then the CAR plans to update (if necessary) its Guidelines and to conduct a second series of (perhaps four or five?) consultation sessions with travel agents around the country. It will be interesting to see what the CAR puts forward at these sessions – will that just be its Options C, D and E plus the four suggestions listed above in which it “sees merit”, or will it be willing (or legislatively able?) to ‘step outside of the travel agent / tour operator box’ and include options such as the ITAA’s €0.50 levy on ALL ex-Ireland bookings?

It will also be interesting to see how many travel agents attend these consultation sessions and to what extent they demand an updated regulation system that is fit for purpose and protects the travelling public no matter how or with whom they book their overseas travel.

As Shakespeare so famously asked: “To be, or not to be: that is the question: Whether ’tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles, And by opposing end them?”

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NEIL STEEDMAN has been a trade journalist, editor and proofreader for 53 years, and ITTN's News & Features Editor for 43 years. His travel blog is at

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