Ensuring Financial Security: The Vital Role of Bonding in the Travel Industry

In ABTOT’s recent submission to the Department for Business and Trade’s Call for Evidence on the PTRs, we emphasised three crucial points, with bonding taking centre stage: 

  1. Bonding is the backstop of consumer financial protection and should be placed first in any financial failure claim, releasing Merchant Service Providers (MSPs) from S.75 claims and banks from chargebacks which will lower costs for businesses
  2. Domestic package holidays in all their forms should remain financially protected – any erosion of protection will damage consumer confidence and cause confusion
  3. The Govt should be able to suspend the PTRs in extenuating circumstances and introduce more equitable refund obligations for tour operators and suppliers.

All three points will be covered in individually. 

In this article we explain why bonding stands as the linchpin of consumer financial protection and why it warrants utmost attention from policymakers. There will also be follow on articles on why ABTOT strongly maintains that Domestic Package Holidays should remain financially protected and the areas of the current Package Travel Regulations we think should be reformed. 

Bonding serves as the primary safeguard for consumer financial protection in cases of financial failure for all travel packages. The majority of the outbound packages are protected by the ATOL scheme regulated by the CAA. Domestic packages that also include flights come under the ATOL scheme. Bonding serves as an effective measure for both flight and non-flight packages. 

One of the critical advantages of bonding is its stability. Unlike merchant acquirer services or supplier failure insurance, which can be abruptly altered or withdrawn, bonding offers a long term, consistent level of protection.

Legislating bonding as the primary fund in any travel insolvency claim, we can alleviate the burden on MSPs from S.75 claims and relieve banks from chargebacks, ultimately reducing costs for businesses across the board and ensuring peace of mind for both businesses and consumers

The insights we present are not just our own; they represent the collective voice of our 300+ Members, gathered from feedback, surveys and roundtable discussions.  As an approved body appointed by the UK Government for over three decades, ABTOT brings a wealth of experience and expertise to the table.

During the tumultuous period of the pandemic, the bonding market (bank and Insurance) as a whole remained intact and supportive.  While other forms of insurance faltered, bonding stood resilient, providing a vital lifeline to travel organisers and consumers alike.

Our recommendations are rooted in practical considerations. We propose streamlining consumer protection efforts by eliminating duplication of cover between merchant service providers and financial protection products. By making financial protection providers the first call in a claim, we can reduce costs and enhance certainty for businesses of all sizes.

Moreover, extending the validity of bonds to 24 months, with a 12-month run-off period, would provide added reassurance to the sector, especially in the face of future crises. This proactive measure reinforces the bonding providers’ commitment to long-term stability and resilience in the travel industry.

In conclusion, bonding is not just a regulatory requirement; it’s the bedrock of consumer trust and financial security in the travel industry. By prioritizing bonding and implementing our recommendations, policymakers can ensure a robust framework that safeguards both businesses and consumers, fostering confidence and resilience in the face of uncertainty.

Samantha Bradbury
Membership Director