Bestjet collapse Travel Compensation Fund insolvent travel agencies Australia news


A little-known consumer loophole has turned this Gold Coast family’s once-in-a-lifetime holiday into a $7000 nightmare, sparking calls for better customer protections in the deregulated travel industry.

Queensland dad Jeff Cole planned to celebrate his 50th birthday in Thailand with his wife Kelly Cole and their children.

In late November, Mrs Cole bought seven airfares to Phuket via online travel agency Bestjet, flying with Singapore Airlines on February 23. 

This Gold Coast family who bought airfares through Bestjet were left out of pocket. From left: Trent Mathews, Kelly Cole, Taylor Cole, Holly Mathews, Kurt Cole, Blaze Elull (child), Jeff Cole, Casey Cole (front) and Michaela Berry. (Supplied)

She booked using POLi Payments, an online debit payment system operated by Australia Post.

The $6622.71 was withdrawn from her ANZ bank account and she received the eTickets on December 10.

But just eight days later, Bestjet collapsed with debts of $26 million.

The family’s airfares were cancelled and both ANZ and POLi Payments refused to reimburse them.

“We’ve just been getting the run around basically. It’s been very stressful. There were lots of tears from my mum,” the Coles’ daughter, Holly Mathews, told 9Finance.

“We had travel insurance too, but when you read the fine print, it doesn’t cover if a travel agent goes bust.”

Read more 9Finance coverage of the Bestjet collapse here

The Coles bought another seven airfares – costing $7000 – so the family could celebrate Mr Cole’s milestone birthday as planned.

An Australia Post spokesman told 9Finance the government-owned corporation wasn’t liable because POLi Payments merely “acts as a gateway to send money”, while an ANZ spokesman said the bank “made multiple attempts to … try to retrieve their money.”  

But yesterday, the Cole family received the good news that ANZ would refund them in full.

The Queensland family is among hundreds of Bestjet customers who’ve struggled to get their money back. 

But just five years ago, things would have been very different. 

Until 2014, Australian travellers booking services through travel agents would be reimbursed under the industry-funded Travel Compensation Fund (TCF) if a travel provider collapsed.

But following fierce industry lobbying, the TCF and state-based consumer protections were scrapped across the country, forcing consumers into drawn-out fights with their banks and insurers to reclaim their cash.

Bestjet founder Rachel James (right) with her husband Michael James (centre), who was banned from running corporations for three years following the collapse of his airline Air Australia in 2012. (Supplied)

Why was the Travel Compensation Fund scrapped?

From the mid-1980s, Australian states and territories were part of a national licensing regime. 

The Travel Agents Act set out professional standards for the travel industry as well as consumer protections.

Under the TCF system, travel agents had to insure themselves against business collapse.

But to be a member of the TCF, travel agents had to pay hefty guarantees or up-front payments, usually about $15,000, said Dr David Beirman, a senior lecturer in tourism at the University of Technology, Sydney.

This made the scheme extremely unpopular.

“What happened was the good agents were subsidising the bad agents and getting no real benefit out of it. The benefit was to the consumer,” said Anthony Cordato, a travel lawyer at Cordato Partners in Sydney who has advised the travel industry for more than 30 years.

In November 2010, PriceWaterhouseCoopers prepared a review of consumer protections in the travel industry for the Treasury Department.

It recommended the TCF be disbanded, arguing it was an unfair financial impost on businesses.

Travel agents in Australia can choose to be accredited under the AFTA Travel Accreditation Scheme. (File picture taken in 2006). (PR IMAGE)

The recommendation was backed by the Australian Federation of Travel Agents (AFTA), which said in its submission to the review that consumers could rely on the “general protection mechanisms of the ACL (Australian Consumer Law)”.

But consumer advocacy group CHOICE said it was a bad idea because “vulnerable consumers who have the least capacity to bear the costs will pay the most”.

In 2014, the statutory regulations were repealed and TCF disbanded, replaced with an industry accreditation scheme run by AFTA called the AFTA Travel Accreditation Scheme (ATAS).

ATAS accreditation is not compulsory and there is no requirement for agents to have insolvency insurance. 

But to be accredited, members have to adhere to certain professional standards.

Bestjet used to be a member of ATAS, but lost its accreditation in 2016 partly because of allegations it was being run by disgraced businessman Michael James, instead of his wife, Rachel James, the registered director, AFTA chief Jayson Westbury told 9Finance in December.

Should the TCF be reinstated? 

Since the abolition of the TCF, many travellers have been left out pocket – and without reservations – when a travel agency collapsed.

Customers who paid with a credit card can claim a chargeback, but this can be a lengthy process. No travel insurance policy in Australia covers the insolvency of a travel agent.

Mr Cordato said it was a mistake for the TCF to be disbanded because “it was not replaced with a proper scheme to protect customers”.

“It’s not fair because the consumer doesn’t know the risk they’re taking when they’re paying the money to the travel agent,” the author of the Australian Travel and Consumer Law handbook said.  

Experts say the travel industry needs to do a better job of educating Australian travellers about their rights. (Getty Images/National Geographic)

However, Mr Cordato doesn’t believe the TCF, in its old form, should be brought back. 

Instead, he believes the government should make it compulsory for travel agents to warn consumers about the risks of insolvency. 

“There are lots of contracts you enter into where there’s a clear warning that you’re not protected unless you take out insurance. There should be a warning on a booking form and a notice on the itinerary or invoice once the booking is confirmed,” he said.

Mr Cordato also said Australia can learn from the UK, Europe, parts of Canada and the US which have compensation schemes. He said the introduction of a consumer levy in Australia could help in cases of insolvency. This would involve customers paying a small fee per transaction which would be put into an “insurance” fund.

Dr Beirman said AFTA, and the travel industry more broadly, has a responsibility to better educate consumers about their rights and risks. 

“In travel, there has been a trend for consumers to look at the cheapest way to transact travel,” he told 9Finance.

“The Bestjet case has raised a high level of coverage because it is aberrant to generally high standards we see in the travel industry. I think that it should serve as a warning to AFTA to more effectively promote the benefits of consumers dealing with ATAS accredited agents.”

He added: “Bestjet was not accredited but I suspect that many of the consumers who were victims of its collapse were unaware of the implications.”

Bestjet was founded by Rachel James in 2012, weeks after her husband Michael James’ airline Air Australia collapsed. (Supplied)

The Queensland Consumers Association, which opposed the abolition of the TCF, urged consumers to be vigilant.

“It is important without statutory protections like those provided by the TCF and the associated state licensing that consumers be aware of the risks of agent failure and take steps to minimise these,” spokesman Ian Jarratt said.  

“For example by paying with a credit card which may give them a chargeback option and dealing with agents who offer insurance against agent failure. It would also be helpful if travel insurance offered cover.”

An AFTA spokeswoman said the CEO, Jayson Westbury, was in transit and unavailable to comment.

Meanwhile, a Nationals spokesman said the Coalition “has no plans to re-introduce” the TCF and that consumers already have options if a travel agency goes bust.

“The TCF was reviewed and found to be outdated and no longer fit-for-purpose,” he told 9Finance.

Bestjet operators to face public examination

Bestjet and its subsidiaries Wynyard Travel and Brooklyn Travel were placed into voluntary administration on December 18, just six weeks after changing hands.

Bestjet owes 6000 unsecured creditors more than $26 million, the liquidator Pilot Partners said in its Statutory Report to Creditors, released on Monday.

Pilot Partners also said in that report it has “obtained orders” to conduct public examinations in June and July of Bestjet’s “examinable affairs”.

The next meeting of creditors will be held in Brisbane on May 22.

Do you think the Travel Compensation Fund should be reinstated? Email the reporter at rlentini@nine.com.au.



Source link Finance News Australia

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