What are the legal implications for travel agents if a tour operator fails? Farina Azam, partner and travel lead at Kemp Little, shares her insights.
If the demise of Thomas Cook has taught us one thing it’s that the effects of a tour operator’s failure – especially one as big as Thomas Cook – has far-reaching consequences for the travel industry.
Here, I consider the effects of a tour operator’s failure on agents who have sold a failed tour operator’s package holidays.
Once a tour operator fails, all forward bookings with that tour operator are cancelled.
Customers will be entitled to a full refund of all monies paid. Where customers have paid the retail agent by credit card, there’s a risk that the customer may request a chargeback from their credit card company – which will then come out of your pocket.
To reduce the risk of this happening, you should contact affected customers promptly and inform them of how and where to make a claim on the failed tour operator’s financial protection arrangements (see box, right).
As a retail agent, payments you collect aren’t suitable for Section 75 chargeback claims (you’re not the supplier of the services being purchased) and you should try to defend chargeback claims on that basis.
However, this doesn’t stop customers claiming for these refunds, and in some cases, being successful.
Cancellation of bookings may also affect the commission you’re entitled to – check the terms of the agreement you have with the tour operator but it’s not unusual to have terms whereby commission isn’t paid in the event the booking is cancelled.
If already paid to you by the operator, it might need to be refunded.
Commission is sometimes payable on cancellation charges collected from the customer – but no cancellation charges will be collected in circumstances where the customer receives a full refund of monies paid.