What protections are offered for travellers when travel businesses fail? In Ontario, the expectation that consumers will be compensated and repatriated is burdensome at best and a hollow assumption at worst. Why? An antiquated and underfunded consumer Compensation Fund. The President of The Association of Canadian Travel Agencies tells Key Notes On Travel why the Ontario Travel Industry Compensation Fund is broken.
Wendy Paradis, President of ACTA
THE ASSOCIATION OF CANADIAN TRAVEL AGENTS (ACTA) has been very involved in a lengthy lobbying effort to bring much-needed change to the Ontario Travel Industry Act and the Ontario Travel Industry Compensation Fund.
The Ontario Travel Industry Act (TIA) dates back to the 1970s and was designed to serve an economy of cash and cheque transactions. At this time, travel businesses held consumer monies for an extended duration before forwarding to the end supplier (an airline or cruise line). Back then, most people travelled on charter flights with various tour operators who took on a lot of risk – resulting in not infrequent failures, leaving consumers stranded and cash out of pocket. The Compensation Fund was designed to offer affected consumers (at least) a partial reimbursement, while also arranging for the repatriation of passengers who were stranded out of the country.
Today, consumers are booking travel online using credit cards or other forms of e-commerce, and consumer monies received by the travel agency or tour operator are forwarded directly to the supplier upon receipt.
The travel industry has evolved immensely over the last 50 years; it is global and it is virtual. And as it stands, Ontario travel companies are operating at a disadvantage.
The Ontario Compensation Fund is Broken
For many years, through countless submissions, consultations and various government changes, ACTA and other industry associations and companies have repeatedly told the government that the consumer Compensation Fund is broken. It has become an unfair and unsustainable burden on Ontario travel agencies and tour operators.
In the event of a financial failure of a travel business, consumers would expect full compensation. However, there are significant limitations on the Compensation Fund. For example, there is a $5 million maximum payout per enterprise failure. Since well over 90 per cent of Canadian consumers purchase travel using a credit card, most affected passengers have been told by the Travel Industry Council of Ontario (TICO, which oversees the industry and the Fund) to first attempt a charge back on their credit card or to tap into compensation from their personal travel insurance policy. This makes the need for a TICO-capped Compensation Fund irrelevant for the vast majority of consumers. However, if there were a catastrophic failure, such as an airline, the Fund would not be able to protect consumers due to the $5 million limit.
What's more, since the Fund’s inception, Ontario travel businesses have contributed more than $52 million yet it currently sits at $24 million. Why? According to TICO annual reports, a large percentage of the annual contributions collected are being diverted to fund TICO’s operating expenses. And, ACTA understands that TICO is proposing the introduction of individual registrations to the Ontario government. If this initiative passes, it will require additional funds be diverted from the Compensation Fund. Ontario travel businesses will be further burdened by mounting administrative costs.
Meanwhile in Quebec...
Fifteen years ago, Quebec introduced its own consumerfunded Compensation Fund (many years after the establishment of an industry-funded Fund) which currently stands at approximately $150 million. The Quebec consumerfunded model offers transparency and awareness of the protection travellers receive in the event of enterprise failure. It is a first-hand example demonstrating that when millions of travellers pay a nominal fee on each booking, the Fund grows to the level that truly offers consumer protection.
Members of ACTA have been writing to members of Parliament and to the Minister of Government and Consumer Services explaining the financial and administrative burdens of contributing to Ontario’s Compensation Fund, in addition to the multitude of costs associated with regulatory compliance and the resulting impact on their travel businesses. This effort is working; the Minister is starting to listen and ask questions. Though for some agencies, the burden is too prohibitive. Some have moved operations to other provinces with fewer regulatory costs, while others consider closing their doors permanently.
Bill 159: Rebuilding Consumer Confidence in 2020
Bill 159, an Act to amend various statutes in respect of consumer protection, has gone through first reading and public consultations, upon the request of the Standing Committee on Justice Policy. The Travel Industry Act reform was not included in this bill; however, it is not too late. ACTA is urging the Ontario government to change Bill 159 to include legislative changes to the TIA and enable a consumer pay model for the Fund.
A Call to Action
When additional consultations are held later in February or March, ACTA is calling on all its members and industry partners to attend consultations and make submissions asking the government to introduce a TICO fee for every passenger in order to grow the Fund and reduce the unfair regulatory burdens on travel companies in Ontario. Anyone who would like more information or wants to get involved can contact Wendy Paradis, ACTA President (firstname.lastname@example.org) or Heather Craig-Peddie, ACTA Vice President of Advocacy and Industry Relations (email@example.com). Visit the website: www.acta.ca.