There’s no longer any Travel
Agents Licensing in Australia
The sun set upon travel agents licensing in Australia on
30 June 2014. The Travel Compensation Fund will process
claims for bookings up to 30 June 2014 and will close down
on 31 December 2015.
Travel Agents Licensing?
licensing began in Australia in 1974, in NSW, after a spate
of travel agency collapses which left travellers stranded
for travel arrangements they had paid for.
Agents Act, 1973 (NSW) was introduced to license travel
agents. It required travel agents and tour operators to
deposit all money received from their clients into a trust
account, with strict rules for payments out of the trust
account. No compensation fund was set up, and so the
consumer protection was based on the fact that only ‘fit and
proper persons’ could become licensed as travel agents and
the threat of criminal prosecutions for breach of the Act.
In 1986 and 1987, travel agents licensing spread around
Australia (except for the Northern Territory). Each State
introduced its own Travel Agents Act, in similar terms. It
applied to travel agents, tour operators and to suppliers
who offered travel and accommodation.
Instead of requiring
travel agents to have a trust account, membership of the
Travel Compensation Fund (the TCF) was made compulsory as a
condition of holding a Travel Agents Licence. The TCF was an
Australia wide body, administered jointly by the States.
From 1986 to 2013, the TCF paid 88,399 claims for a total of
$62.8 million. It had $27 million in funds as at 31 December
It is fair to say that the TCF imposed ‘a cost and
red tape burden on travel agents’ in terms of posting
substantial security bonds with the TCF to join the TCF, and
every year, paying a funds contribution and providing
audited accounts. This represented a substantial financial
cost and an administrative burden on the 99% of travel
agents who looked after their clients’ money honestly and
Why were Travel Agents Licensing
and the Travel Compensation Fund abolished?
introducing the Travel Agents Repeal Bill 2013, the NSW
Minister (Anthony Roberts) said this about the abolition of
“Given that payments are now frequently made
directly to travel providers and/or by credit card, the
Travel Compensation Fund and licensing has become
increasingly redundant. The regulatory scheme has placed a
costly administrative burden on the industry.”
‘Increasingly redundant’ is an apt description. These days,
money paid to a travel agent hardly has time to clear before
it must be paid to suppliers – the IATA BSP being a prime
The Minister also said that the Government
expects that ‘a voluntary industry accreditation system will
commence in mid-2014’ and that ‘commercial solutions will be
developed to address business insolvency’.
These ‘commercial solutions’ have taken a little longer
to be developed than expected. But they promise to provide
more comprehensive consumer protection than the TCF
protection do travel consumers have for money paid?
Through the TCF, travel consumers were effectively insured
only against a travel agent’s default in failing passing on
money received to suppliers.
It is fair to say that the TCF’s protection was limited
to where the client funds had been paid into the travel
agents bank account and went missing before they were paid
to a supplier. The TCF did not cover money paid to
unlicensed persons such as ‘agents’ of a licensed travel
agent, and more significantly, it did not cover money paid
to suppliers – airlines which collapsed, overseas tour
operators who failed, hotels, resorts, and so forth.
As the NSW Minister said about consumer protection in
supporting the Travel Agents Repeal Bill 2013:
internet and e-commerce have transformed the way consumers
purchase flights, hotels, tours and other travel related
products. The 1986 Travel Agents Act is based on an outdated
concept of how this industry operates. The Australian
Consumer Law, which commenced on 1 January 2011, has much
more relevance to consumer travel purchases both now and
into the future.”
Travel agents are subject to the
Australian Consumer Law, just like every other business in
Australia. The ACCC has published The Australian Consumer
Law Guide for the travel and accommodation industry to
assist and inform the industry on its obligations to
Click here for an
‘Outdated concept’ is an apt description.
Despite the best efforts of the TCF to expand its reach
beyond its core of travel agents and tour operators, it
failed to reach across the travel industry, particularly the
suppliers, in any meaningful way. A good example was the
collapse of Air Australia in February 2012, where no TCF
coverage was available to the 225 passengers who had to pay
for a fare on another airline when they were left stranded
in Honolulu after their flight to Melbourne was cancelled by
The market based
solutions to travel agent insolvency
As the NSW
Minister said in conclusion in recommending the Travel
Agents Repeal Bill 2013:
“The well-considered transition
plan replaces largely redundant institutions and approaches
in favour of market-based mechanisms capable of
accommodating all parties’ needs for future travel
Travel agents who ‘take your savings and
leave you stranded’ have almost always have spent the money
they received from the traveller dishonestly for their own
purposes. They go into voluntary administration and / or
liquidation once the traveller asks why the tickets have not
issued or the arrangements they have paid for have not been
confirmed. The liquidator often cannot recover enough funds
to compensate the clients for their loss.
So it is the travel agent’s insolvency that the market
based solution must be directed to.
AFTA has introduced
ATAS, a travel agents accreditation scheme, with the intent
that travellers should have more confidence when dealing
with an ATAS accredited travel agent than non-accredited
agents. AFTA does not stand behind the ATAS accredited
travel agents if become insolvent and travellers lose the
money they have paid.
To overcome this lack of protection,
AFTA advises travellers “if you are in a position to pay
with a credit card, there’s a small surcharge but it
can be the cheapest form of insurance”. The
surcharge is an extra 1% to 2% of the travel cost / fare
paid. The insurance is what is known as a credit card
charge-back which is what credit card issuers provide if the
travel service for which the credit card payment has been
made is not provided because the supplier ceases to operate.
A refund – a credit of the payment is given because the
travel service cannot be supplied.
That is the reason why
credit card travel insurance does not cover insolvency of
suppliers – insolvency is covered by the charge-back policy.
Click here for more
information on what credit card travel insurance covers.
Another market-based solution is found in some travel
insurance policies which cover the insolvency of travel
agents, as well as the insolvency of transport suppliers and
accommodation suppliers. Insolvency cover is found in
comprehensive travel insurance policies, as opposed to
credit card insurance policies or discount / on-line
Yet another market-based solution is
that some groups of travel agents have taken out their own
insurance policies to cover insolvency by the travel agent
and by the suppliers to whom the client money is paid.
such group is MTA Travel with its Zero Flight Risk™ product
which provides protection to any client purchasing travel
products and services through an MTA member. MTA will
reimburse their funds in the event of any approved travel
intermediary or end supplier becoming insolvent, and being
unable to deliver the product or service.
covered by the MTA policy are: Airlines, Intermediaries,
Overseas wholesalers, Tour operators, Coach companies &
trains, Cruise lines, Resorts, hotels & villas, Car hire
companies, Destination management businesses. Zero Flight
Risk™ goes much further than the previous protection
afforded under the former Travel Compensation Fund which
only guaranteed clients funds in the event of the failure of
a TCF member.