Has the end of travel agents put travellers at risk?

As new eras go, the change to a system of self-regulation for Australian travel consumers on July 1 has been deathly or mercifully quiet, depending on your point of view.

On that day, the old Travel Compensation Fund (TCF) protecting the money of consumers who had paid in advance for travel through agents was abolished.

In past years, there was usually at least one big travel agency collapse a year, with an accompanying scandal about fly-by-night operators leaving town with millions of dollars of other people's money.

In recent years, travel has been one of the early adopters of the internet to replace many of the indirect relationships between travellers and the suppliers they use, like airlines and hotels.

The surge in self-booking by consumers via the web has meant the disappearance of thousands of travel agents who had been clipping 10 per cent or more as commission from the sale of travel products.

But now, with the whole travel agency system facing unprecedented competitive pressure from the internet, only those with a defined value-adding niche are surviving an there's no room for old structures like the TCF, which had been funded by a levy on agents.

The Australian Federation of Travel Agents reckons consumers are better off, with deregulation, of which the TCF abolition is part, saving $25 million a year in red tape.

In mid-August, however, the Australian Consumers Association, through its campaigning agency Choice, raised concerns about the first agency collapse since the new voluntary regime took over from the TCF.

Choice says that, when Melbourne-based Australian Specialty Tours Pty went into liquidation on August 15, an unknown number of consumers were left out of pocket. Only consumers who bought packages before July 1 were able to get compensation for their losses from the TCF, while those who paid via credit card may be able to get a charge-back from their bank. 


Choice spokesman Tom Godfrey warned that travel insurance might not be the safety net consumers thought it would be as none of the policies analysed in Choice's most recent travel insurance review protected consumers against travel agency collapses.

"Consumers should ask their agent what steps they have taken to protect their client's funds," he said. "There is now a range of insurance products that agents can take out to protect your money."

Consumers should also remember that when booking travel, either through an agent on online, they are protected by the Australian Consumer Law.

Australian Federation of Travel Agents chief executive Jason Westbury told industry website Travel Weekly he was "heartened" by Choice's comments following the collapse of Australian Specialty Tours.

"It's the first collapse since deregulation so it's bound to be a bit of a learning curve for everyone to see where the calls go and how it is managed," Westbury said.

"We made recommendations for [customers] to seek a charge-back from their credit card company if applicable, but those affected by having paid cash are advised to commence proceedings with a solicitor under Australian Consumer Law," he said.

Those who lost money paid to Australian Specialty Tours had bought packages that appeared to range between $1800 and $3500 for everything from tours of Tasmania to more expensive excursions to the Kimberley ranges in the northwest.

Once you start involving solicitors it becomes a potentially expensive exercise to recover funds, but between all the remedies available – from credit card charge-backs to civil actions under the Australian Consumer Law to simple travel insurance claims [assuming you have bought a policy that doesn't contain exclusions for agency collapses] – the range of protections available is light years away from the misery that almost always accompanied travel agency collapses 20 years ago.

The internet and electronic payment systems have created ever more sophisticated ways for criminals to separate people from their money. But, along with more enlightened regulation, technology is not only slashing the cost of buying and selling things for consumers, but also making it easier to provide consumer protection.

The Australian Consumer Law is a revision of the former Trade Practices Act, introduced in 2011, which strengthens consumer protections, especially in the travel industry.

Do you still use a travel agent or do you book direct online? How do you protect yourself in case something goes wrong? Post your comments below.

After 24 years since the first Traveller's Check in The Age in September 1990 and five years since the first Traveller's Check online blog in August 2009, this is the final weekly column for Clive Dorman, though he will continue to contribute to Traveller.

You can keep in touch with the author at TravelConsumerDaily.com, on Twitter or by email at clivedorman@hotmail.com.