Are you covered? Agent exploits loophole

Full marks to the Melbourne travel agency for grabbing a headline – at least in the travel trade – last week that exploits next year’s changeover to a new consumer protection system for people booking travel.

The Travel Counsellors company has announced its own consumer protection arrangement where everything booked through the company will be fully protected from financial loss from third party default. 

It takes advantage of consumer uncertainty about what will happen when the industry-run Travel Compensation Fund is disbanded on July 1 next year, to be replaced by a new scheme that has been in the works since the Federal Government introduced the Australian Consumer Law in 2011.

As part of that change, there was a major overhaul of the former Trade Practices Act, rebadged as the Australian Competition and Consumer Act, which cracked down on dodgy practices in travel and related industries, including lying about real airfare prices through the use of so-called component pricing and hiding submerged extra charges in car hire, for example.

The trusty old Travel Compensation Fund, established by the Australian Federation of Travel Agents (AFTA) in 1986 and covering all licensed travel agents, has paid out more than $56 million over the years to cover the cost of travel agency collapses.

But the TCF was nowhere to be seen in 2001, for example, when Ansett Airlines collapsed or in 2012 when Air Australia left thousands of people in the lurch because the scheme does not cover the failure of suppliers like airlines.

That has made the TCF more irrelevant than it has ever been, since most consumers now bypass travel agents and book direct with airlines.

The travel industry is now working on its transition plan that will take effect after the TCF is abolished on July 1 next year. There is expected to be a mix of voluntary standalone insurance products and insurance cover that’s incorporated in the price of product purchased from agents.

Either way, the industry believes its consumer coverage will be comprehensive but warns – as per its latest motto developed after the internet allowed consumers to bypass agents: “If you don’t use a travel agent, you’re on your own.”

Indeed, there will be no big brother, government or otherwise, to nanny travellers. The new consumer law is also no substitute for travel insurance, which allows a company like Travel Counsellors to exploit the perceived gap in the market in Australia.

The company says its new financial protection scheme will provide protection for the customer if any supplier, wholesaler or airline booked through Travel Counsellors defaults.

The chairman and founder of Travel Counsellors, David Speakman, told the travel trade media: “We were concerned that as the Travel Compensation Fund is set to disband on July 1, 2014, consumers could be left with inadequate financial protection, and may be in danger of losing their hard earned cash if a travel provider does fail. 

“We have had an initial discussion with AFTA regarding its planned accreditation scheme.  While we may consider joining in the future, we feel that challenges remain for AFTA in delivering a credible all-encompassing level of financial protection to all consumers. 

“We believe that our initiative is the right thing for our customers at the moment, and we look forward to the industry putting this issue at the top of its agenda."

I’m told that the Australian travel industry scheme to replace the TCF will be announced around April next year.

But the bottom line is that the old saying holds true: “If you can’t afford travel insurance, you can’t afford to travel.”

I will be keen to see how consumer protection measures develop as we near waypoints like next year’s abolition of the TCF.

Do you use travel insurance to protect yourself when travelling? Have you been caught by the collapse of a travel supplier - either an agent or an airline? Are current protections enough? Post your comments below.