About ABTA. ABTA response to BEIS consultation September

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1 ABTA response to the Department for Business, Enterprise and Industrial Strategy Consultation Updating Consumer Protection in the Package Travel Sector September 2017 About ABTA This response is submitted on behalf of the membership of ABTA The Travel Association. ABTA was founded in 1950 and is the largest travel trade association in the UK, with almost 1,200 members and over 4,400 retail outlets and principal offices. Our Members range from small, specialist tour operators and independent travel agencies specialising in business and leisure travel, through to publicly listed companies and household names. ABTA Members provide 90% of the package holidays sold in the UK, with Members also selling millions of independent travel arrangements. Annually, ABTA Members turnover is in excess of 37 billion. ABTA s focus is ensuring that Members can operate their businesses in a sustainable and successful manner, enabling their customers to travel with confidence. ABTA is a BEIS Approved Body under the 1992 Package Travel Regulations which, along with the ATOL Regulations, implement the 1990 Package Travel Directive (PTD) and the 1992 Package Travel Regulations (1992). ABTA is the largest of the three BEIS Approved Bodies, the others being the Confederation of Passenger Transport (CPT) Bonded Coach Holidays (BCH) scheme and the Association of Bonded Tour Operators Trust (ABTOT). ABTA has absorbed the Federation of Tour Operators (FTO) Trust Fund and the majority of the Members of the Passenger Shipping Association (PSA) and Association of Independent Tour Operators (AITO) Approved Body operations. We protect some 2.6 billion of turnover through ABTA s financial protection scheme for the 441 Members who undertake non-licensable package, and non-package travel arrangements as principal. ABTA also administers an arrangement for some 181 Members who utilise the ABTA-ATOL Joint Administration Scheme (JAS) in order to utilise their ATOL licences. This agreement was put in place following the 2012 ATOL Regulations in order to provide a solution for Members requiring an ATOL. The scheme allows Members to deal with one organisation (ABTA) in relation to their licensable (ATOL) and non-licensable obligations. Where security is required, a single combined requirement is achieved and provided to ABTA. ABTA also operates a scheme of financial protection in relation to retail agents under its own rules. The purpose of the scheme first and foremost, is to provide pipeline protection to ABTA s tour operator Members in the event of an ABTA travel agent failure, so that consumer payments reach their tour operator and the consumer may travel without difficulty. The scheme will also consider claims from consumers in the exceptional event that the agent has not booked the consumer s holiday, or in certain cases, where the customer s contract with the principal is unenforceable and the customer is otherwise likely to suffer a financial loss. ABTA holds some 536 Million in financial security from Members in relation to its schemes of financial protection. This is generally in the form of Bonds and insurance instruments. ABTA Insurance PCC Limited is a wholly owned subsidiary of ABTA and has provided the vehicle for the reserve fund required by virtue of Regulation 18 of the 1992 Package Travel Regulations since 1993, in the ABTA response to BEIS consultation September

2 form of a captive insurance protected cell company (PCC). The total assets of ABTA Insurance PCC Limited are some 20 million and of the ABTA Group are 36 Million. ABTA and the FTO have operated financial protection schemes for UK consumers since the late 1960s, before the ATOL scheme was introduced in the 1970s or the PTD/PTRs in the 1990s. ABTA is therefore the longest standing as well as a highly experienced financial protection organisation operating within the UK. ABTA also operates a Code of Conduct for the protection of consumers with standards of conduct exceeding the legal minimums, which is monitored and enforced by a full time team within our Legal branch. The Code is overseen by a disciplinary Code of Conduct Committee, who have powers to reprimand, fine and terminate Membership. ABTA also works in times of international or destination crisis to support consumers, working with key stakeholders including the FCO Consular and Crisis teams. ABTA s 1,168 Members comprise: 795 Members who act as a Principal, of which 654 hold ATOL licences. Within the 795 Members, 386 are also travel organisers within the scope of the 1992 Package Travel Regulations (PTRs) in relation to non-atol packages and utilise ABTA as their BEIS Approved Body under the PTRs. 751 Members who act as an Agent, of which 399 hold ATOL licences. 377 Members are dual Members, which operate both as Principal and Agent for different services, within the same legal entity, of which 350 hold ATOL licences. Executive Summary 1. ABTA supports the Government s general approach to the implementation of the Directive, and urges the reform process to be progressed as quickly as possible. 2. UK travel companies need urgent clarity surrounding their legal obligations. We urge the two responsible Government departments, the Department for Transport (DFT) and the Department for Business, Energy and Industrial Strategy (BEIS), to publish comprehensive guidance to assist businesses in their interpretation of the Directive and the forthcoming Regulations. 3. ABTA does not support gold-plating of this Directive. We urge the Government to ensure that no provisions within the Directive place UK travel companies at a competitive disadvantage vis-à-vis their European competitors, and that no sector of the UK travel industry has obligations placed upon them that do not apply equally to their direct competitors operating in the same space. 4. In particular, ABTA does not support the retention of flight-only protections under the ATOL scheme, which we consider to be gold-plating and the source of very real market distortions. ABTA has always argued for an all in or all out approach i.e. all flight only sales channels should be protected on equal terms or none at all. The status quo is not a retention of flight-only protections, but rather a retention of protections applying to a minority sub-set of intermediaries. As the Government has never supported the inclusion of airline sales of seat only services within the ATOL scheme or any other scheme of protection, we do not believe that an all-in approach is a possibility. It is for this reason that we oppose the retention of the current regime, which would perpetuate the current unfair two-tier system and continue to disadvantage UK traders. 5. ABTA considers the definitions of a Package within the Directive to be reasonably clear, but would ABTA response to BEIS consultation September

3 support further guidance on interpretations from the Government on the matters highlighted below. 6. The definitions and practicalities surrounding the introduction of Linked Travel Arrangements are less clear, with considerable scope for confusion for consumers and business alike. ABTA believes the Government must publish clear guidance on the obligations of travel companies in this area. 7. As the UK prepares to leave the European Union, ABTA believes it is important that the Government seeks to ensure UK travel companies are not disadvantaged by regulatory divergence or differences in the way that the Directive is applied. 8. ABTA supports implementation of the Directive in a way that increases consumer clarity, but that does not seek to add further regulation where this adds no effective consumer benefit. For example, we agree that there is no consumer benefit to be obtained from an automatic cancellation of travel arrangements when consumers fail to respond to notification of changes. Cancellation in such circumstances would only lead to further confusion, and potentially increase consumer detriment. 9. ABTA would highlight an error in relation to the wording of question 10 of the Directive, which includes reference to unavoidable and unforeseeable circumstances. The proper wording of this provision is unavoidable and extraordinary, which is an important distinction. We urge the Government to ensure the correct wording is used. Further, the right to terminate in such circumstances only arises where the unavoidable and extraordinary circumstances significantly affect the performance of the package. This is an important qualification of the right given to travellers. 10. ABTA believes that the provision, once properly worded, does not constitute a material change from the position established in these circumstances under the existing Directive and considers that the travel advice issued by the Foreign and Commonwealth Office should continue to be the benchmark for situations where, although the package can in practical terms still be performed, the circumstances might suggest that the package has been significantly affected. 11. ABTA has raised some concerns with the existing financial protection regimes outside of the ATOL Scheme, including the matter of trust accounts and the suitability of this as financial protection mechanism within the Directive. We believe existing rules in this area have the potential to cause serious consumer detriment, and must be amended in this reform process to ensure the regime is placed on a more sustainable footing. 12. ABTA agrees with the proposals to appoint Central Contact Bodies, and with the proposal for the Civil Aviation Authority (CAA) to take responsibility for flight-based arrangements. We believe a Central Contact Point for non-flight arrangements could reasonably be delivered through existing bodies. 13. ABTA believes the Government would be making an error in failing to introduce an online registration scheme as part of this reform process. Such a scheme, which could be populated by the relevant licensing and approved bodies, would enable consumer awareness to be used as an additional compliance tool, lessening the enforcement strain on Trading Standards and modernising consumer protection for the digital age. In addition, the ability for consumers to check the insolvency status of their travel provider would ensure greater incentives for travel companies to comply with the obligations of the Directive. ABTA response to BEIS consultation September

4 Section 1 Scope BEIS Question 1: Should the UK apply the provisions to any additional areas, or to stand alone contracts? Do you have any evidence to support your position? 14. ABTA supports the Government s decision to implement the new Directive and, given pressing time constraints, to adopt a copy and paste approach to implementing the Directive. 15. ABTA does not believe maintaining provisions within UK law that could be considered gold-plating of the Directive is in line with the approach of copy and paste, and does not consider such an approach to be suitable at this time. 16. ABTA s position is partly based on there being insufficient time for the Government to undertake more detailed reforms, given the Directive should be implemented in UK law by 1 January 2018, and more importantly, must be effective from 1 July However, we remain supportive of longerterm reforms to the UK s system of holiday-based consumer financial protection. 17. Whilst we recognise this is a matter for the DFT, as the Department with responsibility for ATOL, ABTA urges the Government, in particular, to consider whether it is appropriate to continue to apply ATOL protection to flight-only sales. 18. ABTA believes the continuation of ATOL flight-only protection could reasonably be considered goldplating, and has the potential to create market distortions, creating an uneven regulatory playing field, and cost base, particularly if flight-only tickets currently sold outside of the ATOL scheme are not protected. As the Government has never supported the inclusion of airline sales of seat only services within the ATOL scheme or any other scheme of protection we do not believe that an all-in approach is a possibility. It is for this reason that we oppose the retention of the current regime, which would perpetuate the current unfair two-tier system and continue to disadvantage UK traders. ABTA is interested, however, to know If the Government is minded to review its position on flight-only sales by airlines 19. ABTA is aware of calls to create an exemption for domestic packages, enabling businesses selling purely domestic packages to sit outside the scope of the Directive. We understand that one suggestion is that an exemption could be based on certain additional travel service elements, such as theatre tickets, not being considered as a significant part of a package contract on the basis they account for less than 25% of the total package price. 20. ABTA does not believe a domestic exemption can be justified on the basis of cost alone, as often while the additional travel element might be low in monetary value, the element could nonetheless be a significant motivator in the consumer s purchasing decision for the package as a whole. For example, if a consumer purchases a hotel night in London with theatre tickets, it is likely the theatre ticket though possibly comparatively low in value will have been a significant factor in the consumer s purchasing decision for the hotel night. Section 2 New definition of a package BEIS Question 2: Are there any particular elements of this definition that you think are difficult to interpret? ABTA response to BEIS consultation September

5 21. ABTA considers that the definitions of a package within the Directive are reasonably clear although there will always be situations on the margins where differences of opinion will arise. 22. ABTA believes that the definition of a package within Article 3.2 (b) (v) is likely to be largely ineffective, as currently drafted. The definition covers online click-through sales where there is a transfer of consumer data between traders, including the consumer s name, contact information and payment details. The practical processes for doing this whilst complying with UK/EU data protection laws, particularly if attempted outside of fixed contractual agreements or single company structures, would, we believe unattractive as a commercial sales model. Therefore, we do not envisage large numbers of packages being created in this way. 23. ABTA notes that the European Commission is committed to reviewing Article 3 2 (b) (v), to assess the effectiveness of this provision, in 2019, a year after implementation. ABTA urges the UK Government to closely monitor this review process, and to ensure any amendments that improve the effectiveness of the Directive can be adopted into UK law. 24. The definition of a tourist service has historically caused some debate and is likely to continue to do so under the new Regulations. Some clarity is provided in Recitals 17 and 18 and further guidance in this regard would be helpful particularly for those traders who do offer holidays based on combinations of one only of transport and or accommodation and or car hire together with another service which may or may not be classed as a tourist service. An example would be the offering of accommodation together with a service which has an element of education, learning or training. Guidance on when such services should be classed as falling within the definition of a tourist service would be helpful for the many providers of such trips. 25. It is unclear whether a package will be created where a trader sells a customer a package holiday as the retailer of an organiser and, during the same visit to the single point of sale, the traveller also purchases a further service such as car hire, a connecting flight, or airport hotel accommodation. Recital 17 offers some guidance so it is clear that not every additional sale of transport, accommodation or other tourist service would create a further package in respect of which the retailer would be the organiser but the parameters of this are unclear. ABTA believes it would create an unreasonable level of liability on the retailer for it to have to assume the responsibilities of the organiser of the original package simply by processing the sale of car hire or other minor transport, accommodation or other tourist services alongside an existing package. It would also lead to a multiplicity of financial protection and liability arrangements which would be entirely confusing for the traveller and the businesses concerned. We believe that the sale of additional travel services by a trader alongside a package holiday which the trader is selling as retailer for an organiser should not create a further package holiday in respect of which the trader would become the organiser. In any event, it is questionable whether a package itself falls within the definition of a travel service under Article 3(1). Although a package might include the carriage of passengers or accommodation or car hire or another tourist service for example, the package is not, itself, the carriage of passengers or accommodation or car hire or another tourist service. It is an entirely distinct product that will be regulated and protected in its own right. 26. ABTA believes the new requirements for assisting passengers with reduced mobility will require further guidance from the Government, to ensure clarity for businesses and consumers. 27. Article 23 attempts to bring within the scope of the Directive companies that state that they trade as travel service providers, intermediaries or in any other capacity where they are in reality the organiser of ABTA response to BEIS consultation September

6 a package or the trader that facilities a linked travel arrangement. ABTA believes that this is an attempt to bring within the scope of the Directive companies that trade as agent for the consumer amongst others. Whilst Article 23 might be successful in pointing out that, if you are an organiser, you cannot avoid responsibility be claiming that you are not an organiser, ABTA does not believe that it is sufficient to bring traders acting as agent for the consumer within the scope of the Directive. 28. Article 3(7) defines an organiser as a trader who combines and sells or offers for sale packages. If a company is genuinely the agent of the consumer, in that they do not sell the services to the traveler but source the services as the traveller s agent from travel service providers for whom they do not act as agent, ABTA does not believe that Article 23 is sufficient in itself to make such traders subject to the requirements of the Directive as they do not fall within the definition of organiser. If the Government wishes to bring such traders within the Scope of the Regulations, further provision must be made within the Regulations to make such traders responsible as organisers or to impose on them the obligations of an organiser, where they do not both combine and sell or offer for sale the travel services in a form that would create a package. BEIS Question 3: Do you envisage any issues with being able to comply with this new definition? ABTA Response 29. ABTA recognises the individual business nature of this question, and has asked Members to respond separately to this question. We have outlined a few problems we envisage with the definitions, below. 30. As outlined in paragraph 22 above, ABTA believes that the definition of 3.2 (b) (v) is unlikely to be effective as currently drafted, and urges the UK Government to closely monitor the Commission s plans for a review of this provision of the Directive. 31. We believe that guidance will be needed to allow traders to understand their obligations for providing the information for PRMS required under Article 5 1 (a) (viii). 32. We do not believe that it will be practicable in many sales scenarios to provide the information required in Annex I in respect of package travel contracts, particularly those concluded by telephone. Alternative arrangements for the provision of information must be allowed by the UK Regulations. BEIS Question 4: What will be the costs of complying? Please provide evidence ABTA response 33. ABTA is not responding to this question. We have asked Members to provide separate responses, based on their own commercial realities. 34. However, we refer back to our answer at paragraph 25 and would be very concerned if traders acting as retailers for organisers in the sale of packages are required to assume the costs and liabilities of accepting responsibility for the original package where further services are sold alongside the original package. ABTA response to BEIS consultation September

7 BEIS Question 5: Are there any particular elements of LTAs that you have difficulty interpreting? Please explain your reasoning ABTA response 35. ABTA believes businesses will require detailed guidance on the interpretation of Linked Travel Arrangements. 36. The definition at Art 3(5) suggests that a linked travel arrangement is only created where different travel service providers are responsible for the services making up the trip. This position is reinforced by the wording of the standard information that must be provided by the trader facilitating the linked travel arrangement shown in Annex II. 37. It would appear to follow, therefore, that a trader could sell on the occasion of a single visit to his point of sale, travel services in his own name, on the basis of the separate selection and separate payment for each of the services and the holiday or trip would be neither a package nor a linked travel arrangement. Such a conclusion would not appear to be within the intention of the Directive. 38. Further, it is unclear whether the definition at Art 3(5) (a) intends that a linked travel arrangement is only formed where there is the separate selection and separate payment during the visit to the point of sale. Alternatively, the definition could be read as intending that it is the facilitation of separate payment whenever that might occur, that needs to be facilitated during the single visit to the point of sale. 39. The standard information at Annex II certainly envisages payment for one service during the single visit but is unclear on the requirement to make a payment for the second service at that time. 40. If a linked travel arrangement is only formed where two payments are made during the visit to the point of sale, this will exclude from the Regulations many sales where e.g. hotel rooms are booked during the visit to the point of sale but paid for on check-out from the hotel. 41. As the UK implements the Directive, Article 3(5)(b), relating to the definition of in a targeted manner, will require very careful definition and guidance in domestic regulations. 42. ABTA notes a contradiction in the interpretation of the definition within the BEIS consultation. Paragraph 34 of the consultation paper references the relevant recital from the Directive where travellers purchase a travel service, such as a flight, and along with the confirmation of their booking, perhaps in an , receive a link to book another travel service, such as a hotel, in the same then this will clearly form an LTA. Within this example, there is no reference to the additional offering being targeted in any way, beyond that it has been sent to the person who booked the first travel service. In the recital, the example clearly expects that the offer made by way of the link is targeted as it is inviting the traveler to book additional travel services at the chosen travel destination. 43. Meanwhile, paragraph 35 of the consultation paper references an example of an LTA as (a situation) where a traveller has purchased a return ticket to New York and when the booking was confirmed, she received an invitation to book a hotel room in New York through a link to a hotel booking site. As the traveller booked a hotel room on the linked website within 24 hours of purchasing their flight, an LTA was created. In this example, the travel service (accommodation) is clearly targeted to the destination where the initial element (the flight) was booked, and is not a general offering of an additional travel service. ABTA response to BEIS consultation September

8 44. ABTA s view is that the correct interpretation of Article 3 (5)(b) is closer to the example within paragraph 35 of the consultation paper. We believe the Directive is clear that the offer has to be targeted beyond simply an offering of the service, and would highlight the Recital (13) includes reference to the offer being for a travel service available at the destination where the first travel service was booked. As such, ABTA does not believe the sending of an offering accommodation, for example, where this is generic, and does not reference the destination of the first service booked, is sufficient to constitute a targeted offer. 45. Article Provides that before the traveller is bound by any contract leading to the creation of a linked travel arrangement or any corresponding offer the trader must provide certain information to the traveller. It is unclear whether this is intended to mean that the trader must give the information before the conclusion of the sale of the first service. If this is case it would seem that the information would need to be given on the occasion of every sale of a single service where there was a possibility that the traveller might then seek to purchase another service. This would be a significant burden on businesses. Further, providing the information at that stage would make the standard information about the insolvency protection, shown at Annex II, at best confusing and at worst misleading. Clarification on the timing of the provision of the information required under Article 19 should be provided. BEIS Question 6: Do you currently facilitate arrangements that will fall into scope? Please provide evidence. 46. ABTA is not responding to this question. We have asked Members to provide separate responses, based on their own commercial realities. BEIS Question 7: What do you anticipate will be the cost of complying? Please provide evidence. 47. ABTA is not responding to this question. We have asked Members to provide separate responses, based on their own commercial realities. BEIS Question 8: What problems do you envisage with complying? Please provide evidence. 48. ABTA is not responding to this question. We have asked Members to provide separate responses, based on their own commercial realities. 49. We do not believe that it will be practicable to provide the information required in Annex II in respect of the sale of linked travel arrangements. As stated above, the prescribed wording of Annex II does not always reflect the reality of the business models, protection regimes and sales processes of traders. Many travel services that form part of a linked travel arrangement will be covered by a scheme of financial protection but the prescribed wording will state otherwise. Alternative arrangements for information provision must be allowed by the UK Regulations. BEIS Question 9: Do you agree that the contract should remain in place unless the traveller requests termination? 50. ABTA supported the approach suggested by the Government in the Directive s drafting stages, and continue to believe that it would be illogical for consumer s to have their travel arrangements cancelled simply on the basis that they failed to respond to notification of changes. BEIS Question 10: Do you envisage travellers being given the option to terminate in unavoidable and unforeseeable circumstances causing significant issues? Please give examples ABTA response to BEIS consultation September

9 51. ABTA notes that Article 12.2 of the Directive gives consumers the right to terminate their package, before the start of the package, without paying any termination fee The provision applies in cases where unavoidable and extraordinary circumstances occur at the place of destination or its immediate vicinity and significantly affect either the performance of the package, or the carriage of passengers to the destination. 52. This is a continuation of the right given to travellers under Article 11 where the traveller can terminate the contract without paying a termination fee where the organiser is constrained to alter significantly any of the main characteristics of the travel services. This is a reflection of the current situation in the UK where package organisers will allow travellers to cancel without paying a termination fee in the event that unavoidable and extraordinary circumstances mean that the package services are significantly altered or the Foreign and Commonwealth Office (FCO) advises against travel to the destination. 53. As such, ABTA believes that framing this as an additional right for travellers to terminate their contract is unlikely to result in significantly different scenarios to those experienced currently. Care should be taken when referring to this provision to avoid consumers believing that they have increased rights to cancel where the package has not been significantly affected either by reference to the actual provision of services or by reference to the FCO Travel Advice. 54. ABTA notes that Recital 31 says that Article 12.2 covers situations where it is impossible to travel safely to the destination as agreed in the contract. ABTA believes the appropriate test for this provision should continue to be the applicable Travel Advice from the Foreign and Commonwealth Office (FCO). BEIS Question 11: Do you agree that we should not implement the right for a traveller to withdraw from an off-premises package travel contract within 14 days without giving reason? If you disagree, please provide evidence 55. ABTA agrees that it would be inappropriate to implement a 14-day right of withdrawal for off- premises contracts. Travellers are seeking certainty when booking travel arrangements. 56. In our view, such a right would lead to traders being unable to offer the best terms to consumers for example the lowest cost hotel room rate might not allow free amendments or cancellations. There would be a danger that such aright would lead to traders not confirming arrangements until the 14 day period had passed and that this could very well lead to a significant consumer detriment if suppliers then did not or could not supply the service required, at the price indicated or at all. BEIS Question 12: Do you agree that we should not introduce legislation that would make the retailer responsible as well as the organiser? If you disagree, please provide evidence. 57. ABTA strongly agrees with the approach outlined by the Government. Extending liability to retailers would not address any consumer detriment, and would represent a fundamental change in the way the travel industry operates within the UK. As such, introducing legislation in this area would be inappropriate. 58. Consumer rights under the directive are secured with the organiser and we see no consumer benefit in adding duplicate liabilities on to retailers. BEIS Question 13: Do you agree with our opinion that the UK should not introduce a requirement for insolvency certificates to be provided with non-flight packages? ABTA response to BEIS consultation September

10 59. ABTA agrees that there is no need to introduce a requirement for an insolvency certificate to be issued to consumers purchasing a non-flight based package. Given the strengthening of pre- contractual information within the Directive, ABTA does not believe there is any discernible consumer benefit to be obtained from insolvency certificates issued after the sale has been completed. BEIS Question 14: Do you agree with the proposal to broaden the scope of insolvency protection regime to cover the new definition of a package introduced by PTD 2015? 60. ABTA agrees with the approach. BEIS Question 15: Are there any issues with the current regime that you think should be addressed? Please give examples. 61. ABTA shares the concerns raised within the consultation in relation to trust accounts. 62. ABTA considers that Regs 20(7) and 21(6) of the UK Regulations, which provide for consumers to receive partial refunds in the event that a trust account is insufficient to meet the claims, evidence that the UK Regulations do not effectively implement the requirements of Article 7 of the 1990 Directive and will not meet the requirements of Article 17 of the 2015 Directive. Article 7 does not envisage consumers receiving partial refunds and requires the provision of repatriation which could not be provided if there were insufficient funds. 63. Further, even without the obvious flaw contained in Regs 20(7) and 21(6), the practical operation of a trust fund means that it is not known what funds are available to be used for the refund and repatriation of consumers until all potential claims are received. Only once the level of claims has been established, which can take many months, can the process of allocating funds for repatriation and refunds begin. This, of course, will be too late to be of any effective help in cases where repatriation is necessary. 64. For these reasons ABTA does not consider that trust accounts should be an acceptable mechanism for compliance with any insolvency protection mechanisms of a future Directive unless the new Regulations mandate certain minimum requirements for a compliant trust account. ABTA does not itself generally accept trust accounts as part of its arrangements, but would accept that they have the capacity to provide a solution if established as part of a properly managed regime. 65. ABTA would suggest that these minimum requirements should address the following key issues: the need for independent professional trustees; the need for a formerly constituted trust account, effectively ring fencing consumer pre-payments from the general assets of the business and securing them from the general body of creditors and any rights of set-off by a Bank in the event of an insolvency; No pre-payments to suppliers should be permitted before the customers return from holiday, so that the full consumer pre-payment is available to fund any refunds and/or repatriations required in the event of an insolvency; A policy of insurance to cover the costs of repatriation where these exceed the pre-payments held in the trust account; A policy of insurance should be required to cover the fidelity and professional negligence of those operating and managing the trust account; A clear mechanism (through insurance) for funding the costs of administering claims and repatriations, so that fees and professional costs are not a drain on the funds available to reimburse consumers in full; ABTA response to BEIS consultation September

11 Inclusion on the proposed register of compliance schemes, those allowing trading standards the opportunity to effectively perform their enforcement duties. Given such a regime, that would then be compliant with requirements of the Directive, we believe that a trust account regime could provide comparative protection to the other permitted methods under the current regulations. 66. Whilst the Regulations place certain restrictions on the policies of insurance that can be used for these purposes, it has become apparent that policies that are commonly used for these purposes can, nonetheless, leave consumers exposed showing that reliance by the organiser on such policies is not sufficient to evidence compliance with Reg 16, leaving the consumer at risk in the event of the failure of the organiser and the organiser at risk of prosecution. The following matters are features of policies at present which prevent compliance with Reg 16: 1. The voiding of the policy for reasons of fraud, misrepresentation, mis-description or non-disclosure in any material particular; 2. The lack of an effective triggering event for payments to be made under the policy which applies to both incorporated and unincorporated businesses; 3. Unreasonably short time limits for claims to be made; 4. Policy exclusions such as war, force majeure, natural disasters, civil strife, non- payment of premiums and exclusions where other insurance or protection might be available, including any protection available under credit or other payment card protection; 5. Limitations on the amounts payable under the policy, which do not align to the level of consumer protection or cost of repatriation; 6. Any other policy conditions which incompatible with the underlying purpose of the policy to provide the protection required by the Directive. BEIS Question 16: What do you think of the proposal to cover non-flight LTA insolvency protection under the same regime as non-flight packages? Do you envisage any issues with this approach? Please explain your reasoning. 67. ABTA agrees with the approach the Government is taking in this area. 68. It is very important that the current regulators and Approved Bodies are able to maintain an overview of each regulated business. Where responsibilities are split, there is an increased risk of error or omission, leading to consumer detriment. BEIS Question 17: Do you agree with proposal to update non-flight insolvency options so that they can be used for EU sales? 69. ABTA agrees with the approach taken by the Government. BEIS Question 18: What benefits do you envisage from being able to trade across EU under the UK insolvency regime? Are you likely to take advantage of this? Please provide evidence. 70. ABTA believes that this question is best answered by Members, on the basis of their individual commercial judgements. We have asked Members to reply separately to this question. 71. Whilst we cannot be sure of the commercial intentions of businesses, ABTA believes that the ability to ABTA response to BEIS consultation September

12 trade cross-border throughout the EU, whilst establishing in a single EU Member State, is a potentially significant commercial opportunity, especially in relation to online sales. 72. It is essential that Government plays its part with the Commission to ensure that all Member States effectively implement the new Directive, if UK consumers are to be exposed to non-uk regulated, EU traders, selling freely in the UK. The case of the Lowcostholidays.com Group illustrates the dangers UK consumers are exposed to when another Member State s regime is clearly non-compliant and ineffective, but the UK authorities had no powers or ability to act to protect UK consumers. 73. UK Government should take powers, compatible with the Directive, to directly regulate traders who are not compliant. Exemptions from the UK regulations should wherever possible be framed as an exemption for properly regulated and compliant traders in another EU Member State and not simply an exemption by virtue of being established in another Member State. BEIS Question 19: What issues do you envisage as a result of this new principle? Please explain your reasoning. 74. In the context of Brexit, ABTA urges the Government to remain cognisant of this provision of the Directive. The Government s published approach to existing EU legislation, which is to adopt all EU laws to the UK Statute, with no guarantee or reciprocal arrangements, could open up significant disparities between UK and EU businesses in terms of access to markets. In the event that no reciprocal access to EU markets can be achieved through negotiations, ABTA believes the mutually reliant elements of the Directive should be reviewed. 75. Guidance will be needed to allow traders and enforcement bodies to understand what it means to be established in a Member State so that it is clear where responsibility for protection regimes lies. BEIS Question 20: Do you have any suggestions on possible mechanisms that the UK could introduce to ensure compliance of third country traders? 76. Guidance is needed as to when a trader will be deemed to be selling or offering to sell in Member State. The law in this area is unclear and traders and enforcement bodies will need clarity on this point. 77. ABTA is strongly supportive of the introduction of an online registration scheme that would enable consumers to check the insolvency arrangements of their travel provider. 78. ABTA believes there are numerous benefits to an online register. The system would be populated by the relevant authority, who would confirm whether the companies insolvency arrangements have been verified. A register would significantly enhance consumer clarity and would be self-policing, reducing strain on Trading Standards, and enabling consumers to make informed purchasing decisions based on the information they receive. 79. ABTA is not sure how Trading Standards or any central body could possibly perform this Directive obligation efficiently without a register coming in to existence, quite aside from the domestic consumer benefits. 80. ABTA notes that a register would be consistent with the principles behind the Department for Transport supported ATOL certificate, which is partly designed to raise consumer awareness as a compliance tool. A register would have the same effect, and would have the benefit of applying to all sales, regardless of the mode of transport. ABTA response to BEIS consultation September

13 81. ABTA is disappointed that the BEIS consultation outlines the Government s opposition to establishing a register, especially considering there is a formal acknowledgement that a register would be useful in terms of complying with the Directive s provisions on the mutual recognition of insolvency schemes between Member States. ABTA does not believe the reasons outlined for not introducing a register, which essentially come down to following a minimal approach to implementation, are sufficient. We urge the Government to reconsider. BEIS Question 21: Do you have any views on the creation of a central contact point(s) in the UK? 82. ABTA notes that Trading Standards is the enforcement body for non-flight based package sales within the existing Directive, and as such there is a logic to their being the central contact point. It would need to be a central function, perhaps therefore managed by the Chartered Trading Standards Institute. 83. However, ABTA is mindful of the strain already placed on the limited resources of Trading Standards, and would therefore support the Government considering private sector options for the provision of a central contact point, which we believe would be most effectively enforced through some form of online registration scheme. 84. ABTA does not believe the creation of a Central Contact Point should lead to additional cost burdens for travel businesses. BEIS Question 22: Do you think that the CAA should act as a central contact point for queries related to ATOL alongside a designated body for all other queries? 85. ABTA agrees that the CAA would be a logical solution, as the administrators of the ATOL scheme, to provide a central contact point for flight-based arrangements within the Directive. 86. ABTA would support the Government s approach that the CAA would operate alongside another designated body, which would have responsibility for non-atol arrangements. 87. AS outlined, above, ABTA believes the Government should investigate a private sector solution as the central contact point for non-atol arrangements, in recognition of the strain already placed on the limited resources of Trading Standards. It is imperative that any scheme is effectively policed, to ensure that the competitiveness of UK established travel companies is not eroded. BEIS Question 23: Should the UK set up a register for all UK established organisers to help comply with the 15 working day response requirement? 88. ABTA strongly supports the creation of an online register to enable consumers to verify the protection status of their travel company. 89. However, ABTA does not believe an online register should be restricted to UK established organisers. Companies protected elsewhere could provide verification of protection received elsewhere which could then be approved by the appropriate authority (CAA. ABTA etc.). Please see our answer to question 18, for more information. BEIS Question 24: Do you agree that the measures should be brought into force on 1 July 2018? Please explain your reasoning. 90. ABTA agrees that the measures should be brought into force on 1 July ABTA response to BEIS consultation September

14 BEIS Question 25: Do you agree with our proposal that the incoming measures should only apply to any sales made from the coming into force date? Please explain your reasoning 91. ABTA strongly supports the Government position that the incoming measures should only apply to sales made from the effective date, 1 July Further information For further information please contact John de Vial, ABTA s Director of Financial Protection and Financial Services (jdevial@abta.co.uk; ), Simon Bunce, Director of Legal Affairs (sbunce@abta.co.uk; ) or Luke Petherbridge, Senior Public Affairs Manager, (lpetherbridge@abta.co.uk; ) 25 September 2017 ABTA response to BEIS consultation September