I move: "That the Bill be now read a Second Time."
This is not a controversial measure. It is an important consumer protection measure which had been promised for some time. The Bill was prepared on the instructions of Deputy Albert Reynolds under the previous Fianna Fáil administration and was subsequently accepted by the Coalition Government. My predecessor, Deputy Paddy Cooney, introduced the Bill in Seanad Éireann on 21 November 1981 where it was welcomed by all sides of the House and passed Committee and Final Stages on 9 December 1981.
The basic purpose of this Bill is to provide in law for measures to govern and regulate the operation of the Irish travel industry and to protect the interests of the travelling public. The measure before the House is an enabling one and the implementation of the protection measures provided for will necessitate the making of regulations.
The House will be well aware of some of the difficulties experienced by customers of the travel trade in the past couple of years. The question of the regulation of the travel trade in the interests of the travelling public has been an ongoing issue for some years now. The ideal situation would be one where governmental regulation could be avoided. With that end in mind, successive Ministers for Transport have, in recent years, urged the trade to aim at a high degree of self-regulation in the interests of both the trade and the public. The trade, through the medium of the Irish Travel Agents' Association, did establish a fund which was used in the case of the failure of two relatively small companies and was also drawn on in the arrangements in which the ITAA participated in relation to Bray Travel clients who were abroad on holidays at the time of that collapse. However, the fund never reached a level sufficient to deal with a major collapse in the trade, such as occurred in December 1980 in the case of Bray Travel. I acknowledge that, particularly in the wake of the Bray Travel collapse, the trade took upon itself in a more serious way to protect its customers by voluntary bonding arrangements and so on. Nevertheless, events have demonstrated that a need exists for Government-sponsored arrangements based on legislation to protect the public.
The Irish travel trade consists of tour operators who negotiate and organise tours, arrange travel, book hotels, publish brochures and so on and travel agents who are the retail outlets for the sale of holiday packages, airline tickets, sea voyages, etc., on behalf of tour operators and transport carriers. At present there are about 30 tour operators in Ireland advertising to more than 100 destinations. There are, in addition, about 200 travel agents in the country, many of whom, although primarily concerned with the retail of packages on behalf of various tour operators, organise weekend tours to London, Amsterdam, and so on. The majority of tour operators and travel agents are members of the Irish Travel Agents' Association.
The person buying a holiday is in the unique position of paying in full and in advance for a very perishable product available outside the jurisdiction almost entirely on the basis of descriptions of the product contained in a holiday brochure. Needless to say, these are extremely attractive. The vast majority of Irish tour operators and travel agents are responsible individuals. However, there is at present no ban on entry to the trade and no criteria or qualifications to be met by new entrants. At present a person can rent a basement flat or shopfront, set himself up and advertise as a tour operator or travel agent and proceed to accept large sums of money over the counter for a service that may or may not materialise, depending on a whole range of factors. The Irish Travel Agents' Association have only limited means of enforcing consumer protection measures on their members and, of course, have no function or power whatever in relation to non-members or new entrants to the trade.
The collapses which have occurred have prompted the ITAA and individual operators to look closely at the degree of protection offered to their customers. As a result the ITAA, as a body and a number of tour operators individually, have secured bonds from insurance companies and banks which are being widely advertised as offering safeguards to the public booking holidays on trust. Action along those lines is, of course, to be commended; the pity is that it took a major collapse in the trade to spur the move.
The bonding arrangements entered into voluntarily were the subject of a study last year by Messrs. Craig Gardner, management consultants, on behalf of the Director of Consumer Affairs. The findings in that study, though necessarily tentative because of the nature of the exercise, pointed to some major shortcomings in the trade. Chief among the shortcomings was the capital structure, with companies trading on the basis of a relatively low paid-up capital compared to the size of their turnover. A further indication of this inadequate capital backing can be found in the fact that only one of the companies surveyed owned their premises with the remainder having their premises on lease. While this may be typical of service industries with little or no investment in fixed assets, the under-capitalisation which the survey revealed, coupled with the absence of reserves or other readily liquifiable resources, suggests a heavy reliance in the trade on credit and cash flow with all the dangers that such a situation holds for the consumer when things go wrong for an operator.
In the area of bonding arrangements, the consultants found that generally tour operators who were members of the Irish Travel Agents' Association were bonded individually to the extent of 5 per cent of turnover, backed up by a reserve fund of £50,000 and a group bond of £500,000 for the summer 1981 season. These arrangements were of course voluntary, and the consultants pointed out that it was very difficult for any trade association to regulate its members when all the regulations were voluntary. For these reasons the consultants concluded, among other things, that the only way to enforce the adequate bonding of tour operators was by means of legislation.
The basic elements envisaged in the present measure are:
— a bonding arrangement for tour operators and travel agents for the protection of their customers;
— a back-up protection fund to be raised by contributions from tour operators on a basis to be determined by the Minister for Transport:
— a system of licensing to control entry to the trade.
The bonding arrangements, which would be inter-linked with the licensing system, would represent the first line of defence in the event of an operator or agent failing to meet his commitments and the protection fund would represent the reserve. Availability of an adequate bond would be an essential requirement before any operator or agent would be considered for a licence.
The basic objectives of the Bill are to prevent failures in the trade as well as to provide remedies where failures occur, to protect the consumer as well as to regulate the trade. Consumer protection is the major motive, but the licensing and bonding elements will have, as a major objective also, the imposition of certain rigours and disciplines designed to put the trade on a proper footing over time and in this way to seek to prevent failures. It is envisaged that the bonding requirement will lead to financial assessments by underwriters who are expert at gauging risks and tour operators who are seriously under-capitalised are likely to be faced with the choice of improving their financial position, paying a high premium or not securing a bond at all. In the same way it is envisaged that in vetting applications for licences, I will be able to call for details of financial resources, reports and balance sheets, and pay particular regard to the degree of capitalisation of applicants and condition licences accordingly.
The three elements involved represent an integrated package which draws on the best elements of protection in force in other European countries. A number of other possible options were considered including the possibility of some form of insurance arrangements. However, such arrangements would not prevent the entry of undesirable elements into the trade and were accordingly discarded in favour of licensing and bonding arrangements of the type envisaged.
The Bill has been generally well received by all the interests concerned. I am aware that retailers, particularly smaller ones, have been concerned about the question of having to secure licences and provide bonds, and I know that many public representatives received representations from retailers about the matter. During the course of the Seanad debate on this measure, many Senators made the point that they would be worried that the Bill might be unduly onerous where agents are concerned. My predecessor gave much consideration to this point in advance of introducing the Bill and came to the conclusion that we would not succeed in achieving our fundamental objective to protect the travelling public unless we included agents. I share that view. I acknowledge that retailers, members of the ITAA, have a good track record, but the question of new entrants to the trade or retailers who are not members of the ITAA is a matter which needs to be considered. However, the Bill is essentially an enabling measure to be implemented by way of regulation. Provision will be made for the particular difficulties of the travel agent and full consultations will take place with the trade in drafting the implementing regulations. My predecessor made this point clear when he addressed the annual banquet of the Irish Travel Agents' Association in Limerick last November and I am happy to confirm it again today.
I am aware that this was not an easy Bill to prepare and that drafting turned out to be somewhat more complex than one would have anticipated at first sight. The first difficulty to be resolved was balancing the need to protect the consumer against the need to avoid the imposition of excessive restrictions on the trade. I believe that the package constructed has been built carefully to achieve that end — to protect the consumer without imposing any undue restrictions on the trade.
Deputies will note that the term "inability or failure of a tour operator to meet his financial or contractual obligations" is very carefully and fully defined in section 2. It will be clear from this that the measures provided for in the Bill are intended to protect travellers in a disaster situation where a tour operator or agent goes out of business or absconds with customers' moneys etc. The bonding and protection fund are not intended to be used to compensate individual or particular clients where, for example, an operator or agent is unable to provide a flight on the date specified due to circumstances outside his control, such as an airline strike. Deputies will appreciate that in such circumstances there could be no question of calling in a bond, revoking a licence or terminating an operator's or agent's means of livelihood and in such cases of force majeure or in cases of an act of God, the question of refunds or the arrangement of an alternative flight or holiday are matters for settlement between the tour operator and the traveller concerned in accordance with the provisions of the original booking contract.
In a statement issued on 22 September last, the Director of Consumer Affairs supported the proposals provided for in this Bill and indicated his belief that the measures involved offer the best hope of avoiding a repetition of the extensive losses which some consumers have suffered in recent times.
There were lengthy consultations with the travel trade in the preparation of this measure. The Bill has been welcomed by the trade and I would like to place on record the assistance received from the trade in preparing this measure and to express my gratitude. This consultation process will, of course, continue through the implementing stage.
I should remind the House that the present measure is an enabling one, and the House may be assured that I will proceed with all possible speed to make the necessary orders and regulations to bring the relevant arrangements into operation. I can say now, however, that the practicalities involved in implementation and indeed the need for further consultations with the trade make it impossible to have all the protection arrangements involved operational for the 1982 summer season. Indeed, even if the proposed measures could be brought into force overnight, it would take some time, for example, to build up the protection fund to a level that would be sufficient to deal with a major collapse. In these circumstances there is an obligation on the trade, in their own interest, both from a customer-relationship point of view and in establishing or maintaining credibility with banks and insurance companies, to offer protection in the intervening period by maintaining or improving their existing bonding and other protection arrangements.
The present measure is an important consumer protection measure and I am happy to recommend it to the House.