The regulator has launched a new consultation with the trade over enhancing consumer protection through the Atol scheme which the CAA said is intended to “lead to better direct protection of consumers’ money and improve the financial resilience of the Atol scheme”.
This could include forcing travel companies to “segregate” all customer payments into trust or escrow bank accounts, with the money only being released when the consumers have returned from their holiday.
The CAA is also considering other approaches such as the “partial segregation” of customer money and mandatory bonds, as well as potentially giving travel companies the option of a “tailored approach” combining the ring-fencing of consumer payments with a bond.
The consultation is asking for opinions from the industry on how “pipeline” money from clients should be handled by agents, who could be required to hold these payments in their own segregated account or pass it on immediately to the Atol holder, with the terms for paying commission “determined through the relevant agency agreement”.
Another suggestion is that APC payments may no longer be charged at £2.50 per person for every booking and there will be a variable “risk-based pricing option” instead for Atol holders.
This would mean those companies using trust accounts “with maximum levels of protection in place to prevent the money from being misused, would pay the lowest level of APC”.
The CAA said that it could also “increase the flat-rate APC and apply the new rate to all Atol holders” but added that this move would not take into account “the risk of failure that individual Atol holders and the value of bookings pose to consumers”.
The CAA has opened the initial consultation for the industry until 30 July, after which it will consider recommendations before launching a second consultation which will make specific proposals in early 2022.
CAA director Paul Smith said: “The Atol scheme exists to protect consumers, and it is therefore right that we work to continually strengthen its financial resilience.
“Following several large Atol failures in recent years, we have become concerned about the impact of businesses using consumers’ money as a source of funding working capital.
“That’s why we are seeking people’s views on changing these arrangements to further enhance Atol protection of customers’ money.
“The travel industry can be reassured that we understand the impact that the Covid-19 pandemic has had on their finances. We will take full account of the need to allow industry to adjust to any new arrangements that will be implemented following the overall consultation process.”
