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Taxpayers Reportedly Funding Compensation For Holidaymakers Adversely Impacted By Travel Agency Failures

Published on Oct 18 2021 10:19 AM in General Industry tagged: Trending Posts / Commission for Aviation Regulation / CAR / Travellers' Protection Fund

Taxpayers Reportedly Funding Compensation For Holidaymakers Adversely Impacted By Travel Agency Failures

Taxpayers are reportedly funding compensation for holidaymakers adversely impacted by travel agency failures during the COVID-19 pandemic as insurance provided by some businesses fell short of the amo...

Taxpayers are reportedly funding compensation for holidaymakers adversely impacted by travel agency failures during the COVID-19 pandemic as insurance provided by some businesses fell short of the amount needed.

As reported by The Irish Times, The Commission for Aviation Regulation (CAR) administers the Travellers' Protection Fund, which compensates those hit when travel agents or tour operators go out of business, and bonds - a form of insurance - provided by the companies themselves do not cover all of those costs.

However, travel agents' and tour operators' contributions to the fund have reportedly run out, reportedly leaving €1.8 million provided by the taxpayer via the Department of Transport to compensate those hit by holiday company failures.

The CAR reportedly confirmed that "currently the fund is supported by the department only".

The fund reportedly stood at €1.3 million at the end of 2019, while the department reportedly contributed €1.9 million in 2020 to ensure that there was enough cash to cover potential claims.

Since then, the CAR has reportedly drawn €1.4 million from the fund to pay customers left out of pocket by travel agency failures, leaving it with the current balance.

The commission said reportedly said that it is continuing to evaluate claims from customers of two companies that have closed, and reportedly did not name the businesses involved.

Rules

CAR licensing rules reportedly require travel agents to put up bonds amounting to 4% of turnover to compensate customers in the case of an insolvency, tour operators reportedly must put up bonds equivalent to 10% of turnover.

In a situation in which a company goes out of business and the bond is not enough to compensate its customers, the CAR reportedly uses the Travellers' Protection Fund to make up the difference.

EU law reportedly obliges the government to ensure that there is enough cash in this fund to cover compensation for customers when travel companies fail, leaving holidaymakers stranded abroad or unable to take trips for which they have already paid.

The Department of Transport reportedly sets aside cash every year in case it is needed to up the fund, and this year it reportedly earmarked €10 million for this purpose, none of which has been called on to date.

In 2020, it reportedly allocated €15 million, and the department reportedly returned the €13.1 million that was not called on last year to the exchequer. It will reportedly also put up cash as a contingency next year.

Pre-Pandemic Warning

The commission reportedly warned before the COVID-19 pandemic that the Travellers' Protection Fund was depleting. It reportedly reached a high of €7.5 million in 2007-2008, but a series of big payouts over the following 10 years reportedly left it at €1.8 million in 2017.

The CAR reportedly began a review at that point of the Travellers' Protection Fund and the bonds that it requires from holiday companies, to ensure that both schemes could provide enough protection for consumers.

One of its proposals was reportedly to seek a once-off payment from travel agents and tour operators to top up the Travellers' Protection Fund. The state had reportedly not sought a contribution from the industry to the fund since the 1980s.

The commission reportedly submitted a number of proposals on travel trade consumer protection to the department in late 2019 as part of its review. However, COVID-19 struck the following spring, reportedly forcing the government and regulator to suspend the review.

The CAR reportedly said, "We plan to continue this work with the department in 2022."

Taxpayers Could Contribute Up To €5m

It has reportedly emerged that taxpayers could contribute up to €5 million in 2022 to help compensate holidaymakers hit by travel agent failures, as the Department of Transport reportedly confirmed at the weekend that it will set aside €5 million in 2022 to cover claims on the fund if the cash is needed.

This money is reportedly part of the department's overall budget allocation from the exchequer, which is turn funded by taxes on workers and businesses, and the department will return any cash not called on by the Travellers' Protection Fund to the exchequer at the end of the year.

All of the €1.8 million in the fund at present reportedly comes from the Department of Transport, according to the CAR.

© 2021 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.

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