FRAUD, FEES AND THE FUND

Posted on 03/28/2016

The Ministry of Government and Consumer Services in Ontario has proposed various regulatory changes to the Travel Industry Act (TIA). At a media briefing last week, the Travel Industry Council of Ontario (TICO) presented these proposed amendments that included all-in pricing which, if passed, could be in effect by 01 January 2017. TICO president and CEO, Richard Smart said that the suggested changes, have previously been raised by the travel industry.

All in pricing The proposed all-in pricing would require all businesses registered under TIA to display the total price to consumers, including all taxes, fees, levies and other charges when advertising travel services. Consumers are asking why similar packages have a different base price, said Smart, “We’ve received a growing number of complaints regarding advertising. “Consumers are losing confidence – and it’s understandable when different prices are advertised for similar products.” Smart said that while the majority of wholesalers in Ontario support the change, there has been criticism and some wholesalers are resistant to the change, especially those operating close to the Canada-US border, who could potentially lose sales to American competitors not bound by the same regulations. Dorian Werda, vice president, operations of TICO, said all-in pricing should help alleviate the suspicions of consumers who apparently are often surprised by hidden fees after booking a trip. Easing registration requirements The Ministry is also seeking more flexible registration and operating requirements for not-for-profit corporations promoting tourism in Ontario, as well as the exemption from TIA requirements for businesses that exclusively offer one-day tours. It is also proposed that claimfiling deadlines be aligned from three months to six months. This would apply to both Standard and Trip Completion Claims. Fraud Fraud in travel is on the increase and Werda has included discussion about the problem in TICO’s Roundtable Sessions this year. The impact of travel fraud is not just confined to consumers, but has been perpetuated on retailers and wholesalers as well – unfortunately by travel agents who are TICO certified, or have been previously certified. According to Werda, ‘rogue’ agents have been known to work at a registered agency while surreptitiously selling travel independently of the registered agency they were associated with and pocketing the customers’ funds. The “agent” would make bookings under their registrant’s agency name, provide personal or unrelated email addresses to receive e-tickets and/or payments. In other instances no bookings at all would be made, or one-way travel booked rather than a round trip. False itineraries and confirmations would be sent to passengers who would learn too late that they were unconfirmed. In some cases the so-called “agent” would access a registrants GDS/Reservation system when they were no longer employed at the agency, while others worked for more than one agency at the same time. Unfortunately, this appears to be a growing trend. In 2014-2015, there were 16 fraud investigations and 95 charges laid with 34 convictions. In 2015-2016 so far (the fiscal year has not yet ended), 10 investigations have been closed, 18 are open ones, 94 charges have been laid, and 46 there have been convictions. Over $900,000 fines/restitution, 1,520 days of jail time and 1,825 days of probation have been ordered. And it’s not just consumers who suffer. Travel retailers have also been hit financially as a result, some have even ceased operations due to the actions of rogue agents. Fraud protection Given that registrants are responsible for the actions of “all travel counselors on contract who are selling or providing advice, including employees and/or contractors who are acting as outside sales representatives,” it is incumbent upon agencies to protect themselves and their clients. TICO is encouraging registrants to implement more controls to monitor travel sales and bookings by their agents, to keep up on current TICO guidelines and to monitor complaints from customers. TICO also suggests agencies conduct a fraud/risk assessment of their business and monitor agents’ social media accounts to ensure they are not misrepresenting the agency. Compensation Fund fee increase Last week TICO announced a proposed Compensation Fund fee increase for registrants. Smart said the increase is actually lower than what was originally approved by the Board in November 2012, when a three-pronged rate increase was to take place over several years. Two of the increases were never implemented. “With this new rate increase, we’re really setting the rate back to what it was in 2001.” Said Smart. “Nobody likes a fee increase but the reality is the industry has evolved, the complexity of it has accelerated significantly in the past few years due to an increase in claims and fraudulent transactions”. Click here for details on the rate increases; To make a submission on TICO’s proposed Compensation Fund rate increase, forward your comments by April 15 to ticoconsultation@tico.ca