When travel agents go bust

Following the recent collapse of one of the world’s oldest travel companies, you may be wondering what protections you have if your travel company goes bust. Before you book your next holiday you might want to brush up on your rights as a consumer and consider our tips on how to protect yourself from financial loss.

Consumer rights

When a company goes bust it usually means they have become insolvent, that is, they can’t pay their debts when they are due. This also means you are unlikely to get your money back.

An insolvent company will have an external administrator appointed to determine whether the company can return to profit or whether it needs to be wound up.

If an external administrator is appointed to a travel company, and you have paid for services, like a holiday, that you haven’t yet taken or received, you may become an ‘unsecured creditor’. Ordinarily unsecured creditors will only get their money back after other creditors, such as employees and shareholders, have been paid.  After everyone else has been paid there often is simply no money left for unsecured creditors.  So you get nothing.  No travel.  No refund.

More information is available on the Australian Competition and Consumer Commission (ACCC) website.

So how do you protect yourself?

Pay with a credit card

If you pay for travel using a credit card then you may be able to ask your credit provider for a chargeback. A chargeback is where your bank reverses a disputed transaction and claims back the money from the merchant, in this case your travel provider.

There are time limits depending on the rules set by Visa, MasterCard and American Express so it’s important to ask for a chargeback as soon as you are aware there is a problem. Make sure you keep receipts and any correspondence to back up your claim.

Travel agent insurance

Travel agents can take out their own insolvency insurance, but it’s not mandatory. Check with your agent whether they have a current insolvency insurance policy in place and whether it will cover you if they become insolvent.

Personal travel insurance

You may think that by taking out travel insurance as soon as you book your trip that you will be covered against the collapse of your travel agent, airline, hotel, tour operator, or other service provider, but this is not necessarily the case.

Most standard travel insurance policies don’t cover ‘insolvency of a travel provider’ and those that do often have limitations on the cover. Read the product disclosure statement (PDS) carefully to find out what is and isn’t covered.

Travel scams

Be wary of offers via email, SMS, or social media pop-ups offering very cheap airfares, accommodation or travel packages, especially straight after you have been searching for travel deals. They could be a scam.

Do your own research. If you pay online, only use websites that start with ‘https’ or have a ‘locked padlock’ symbol at the start of their name in the address bar. Remember, if it sounds too good to be true, it probably is.