TRAVEL LAW & CONSUMERISM
TRAVEL CONSUMER FRAUD: COMPARATIVE ANALYSIS ON REGULATORY
FRAMEWORK AND LEGAL REDRESS IN SELECTED COUNTRIES
Associate Professor Dr. Nuraisyah Chua Abdullah
Faculty of Law, Universiti Teknologi MARA (UiTM)
Shah Alam, Selangor, Malaysia
INTRODUCTION …
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Tribunal for Consumer Claims in Malaysia: 2010-2013:
947 cases relating to claims against commercial travel agencies
1156 cases concerning umrah and hajj (religious travel).
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Fraudulent practices in travel packages: common amongst travel agents
- Malaysia, Hong Kong and Australia.
- false description on the standards of services in the holiday package
preventing tourists from shopping where they like
overcharging for example, charging money for free services such as a
visit to the beach, national park or charging more for services, such as
‘optional tours’.
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literatures are scattered.
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SCOPE: legal framework:
(i) registration and
(ii) operation of the travel agency business
(iii) legal redress in combating the issue of fraud in Malaysia, Hong
Kong and Australia.
LICENSING REQUIRMENT
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Ironically, the registration of travel agencies is only made mandatory in
most countries beginning in the 19th Century, for example, under section
12 of the Travel Agents Ordinance of Hong Kong, Section 5(2) of the
Malaysian Tourism Industry Act 1992 and section 1(2) of the Queensland
Tourism Services Act 2003.
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In Western Australia, all individuals, firms or bodies corporate (companies
and other incorporated bodies) who carry on business as travel agents in
Australia must be licensed under the Travel Agents Act 1985. This includes
general sales agents, tour operators, wholesalers and consolidators as well
as retail agents.
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However, in Western and South Australia, a licence is not required for:
(i) agents who make domestic travel arrangements (i.e. for travel within
Australia)
(ii) whose annual turnover in respect of those arrangements is not more
than $50,000;
(iii) sell tickets, buy for resale or otherwise arrange rights of travel for other
people on conveyances that leave and arrive at the same place on
the same day (for example, day excursions and sightseeing trips);
(iv) sell tickets or arrange travel for other people on a transport that one
owns.
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Non-registration of business by a travel agency is a criminal offence
under the respective laws, for example, under section 7(1) of the West
Australian Travel Agents Act 1985, an unregistered travel agent shall
be subjected to a fine of $50 000 or 12 months’ imprisonment or both,
with a minimum fine of $5 000 in the case of a second or subsequent
offence. Section 9 of the Hong Kong Travel Agents Ordinance 2002
provides that upon conviction, an unregistered travel agent shall upon
indictment be liable to a fine of $100000 and to imprisonment of 2
years or on summary conviction to a fine of $10000 and to
imprisonment of 6 months and the Malaysian Tourism Industry Act 1992,
section 5(3) provides fine of RM 50,000 or maximum 5 years
imprisonment or both.
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One of the many roles of the Travel Agents Registration Board or
Department in Australia is to investigate complaints by members of the
public against licensed travel agents. In any one year the Board would
investigate over 100 formal complaints.
Main grounds of complaint:
(i) fraudulent practices of travel agents including variation of Tour
Itinerary without the client being notified;
(ii) increase in the price of the tour shortly before departure; and
(iii) misrepresentation of facts in brochures and advertisements.
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Travel Agents Registration Board has no power to fine a licensee or
order it to pay compensation to a member of the public, it can take
action against the licence of a licensee.
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Compensation, the Board can direct such person to the Consumer
Claims Tribunal which has the power to grant an injured party
compensation.
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Malaysia: Complaint Management and Consumer Service under the
Corporate Communications Unit, Ministry of Tourism;
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Licencing Department of the Ministry of Tourism: could decide on the
renewal, non-renewal or cancellation of a travel agent’s licence in
the event of fraudulent practices committed by travel agents. This is
also the position in Hong Kong.
REQUIREMENT OF MEMBERSHIP IN TRAVEL
AGENCIES ASSOCIATIONS
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Malaysia and Hong Kong: travel agents must secure membership in
registered travel agencies associations in order to qualify for application
as travel agents. In most countries, there are many travel agencies
associations.
Example: Msia:
(i) Malaysian Association of Tour and Travel Agencies (MATTA),
(ii) Malaysian Chinese Tourism Association (MCTA) and
(iii) Bumiputera Travel and Tour Agents Association of Malaysia
(BUMITRA).
Australia: not a requirement.
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Hong Kong:
(i) Hong Kong Association of Travel Agents Limited (HATA)
(ii) Federation of Hong Kong Travellers Limited;
(iii) International Chinese Tourist Association Limited;
(iv) Society of IATA Passenger Agents Limited (SIPA);
(v) Hong Kong Taiwan Tourist Operators Association Limited;
(vi) Hong Kong Association of China Travel Organizers Limited (who are
initial subscribers of the Travel Industry Council of Hong Kong (TIC)).
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Importance of membership:
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(i) Infringement of Code of Practices of the associations: eg. Fraud
warrants proceedings before the disciplinary board.
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(ii) Board may, terminate the company’s membership.
(iii) Associations: eyes and ears of the travel industry and the Ministry of
Tourism.
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Hong Kong: Society of IATA Passenger Agents Limited (SIPA): requires
that its members be International Air Transport Association (IATA)
accredited agents.
- members will have had to satisfy stringent IATA accreditation criteria
- an applicant must be a member of the Travel Industry Council of Hong
Kong (TIC).
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Travel Industry Council of Hong Kong (TIC):
(i) self-regulating organization of the travel industry
(ii) responsible for improving trade practices;
(iii) formulating and enforcing codes of conduct and directives for the
industry;
(iv) collecting statutory levies and handling public complaints and
enquiries.
MINIMUM PAID-UP CAPITAL AND
INSURANCE
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Msian Licensing requirement:
(i) Local outbound travel agency company:
minimum paid up capital of RM200, 000.
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(ii) Local inbound travel agency companies: minimum paid up capital
required is RM50,000 for rural tours and RM200,000 for city tours.
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Hong Kong:
(i) limited company should have a paid-up capital of not less than
$500,000 and the paid-up capital for each branch office is $250,000.
(ii) sole proprietorship or partnership: no requirement on paid-up capital
but a sum of $150,000 should be paid to the TIC as a security deposit.
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Unique feature of the Hong Kong:
(i) least a manager of two years’ relevant practical experience and
another full-time staff in the operation of such business. (avoiding
fraudulent practices)
(ii) outbound travellers:
- insurance policy for a value of RM100, 000 or
- deposit with the Commissioner of Tourism the sum of RM20,000 or
- furnish to the Commissioner a bank guarantee in the amount of
RM100,000 for purposes of compensation or refund.
WEAKNESS: No inbound package tour law:
absence of legal requirement for compensation scheme
TRIBUNAL FOR FRAUDULENT
TRAVEL CLAIMS
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Claim Compensation in court: expensive
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Tribunal: viable and much cheaper alternative for the forum to settle
consumer claims against fraudulent holiday packages offered by travel
agencies.
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Malaysia and Hong Kong: Tribunal for Consumer Claims: No representation
by a lawyer
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WEAKNESS: not easy to proof fraud by consumers due to lack of skills
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CONTARY:
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(i) New Zealand Disputes Tribunals Act 1988 (NZDT)
(ii) New South Wales Consumer, Trader and Tenancy Tribunal (NSWCTTT)
allow
representation
by
others:
if
parties
can
obtain
permission/approval from the NZDT and the NSWCTTT
Australia: allows representation
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Queensland Commercial & Consumer Tribunal Act 2003 (QCCT): may
allow such representation in the interest of justice at two stages, at
mediation and at pre-hearing.
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Silent as to ‘interest of justice’
fraud cases: should be included in the category of cases where
consumers should be allowed legal representation for the interest of
justice.
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Under the regulation 6(1)(m)(iii) of the Tourism Industry (Tour Operating
Business and Travel) Regulations 1992, the Commissioner of Tourism:
adjudicator in determining the quantum of compensation to be awarded
to travellers in cases involving breach of the terms and conditions stated
in the tour brochure.
The award of compensation is made out of the insurance policy, cash
deposit or bank guarantee which the travel agencies are required to
secure before they may commence travel agency business.
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But seems insignificant as consumers tend to bring the disputed
fraudulent cases to the Tribunal for Consumer Claims.
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NOTE: In case of insolvent or bankrupt: consumer without a remedy.
TRAVEL RESERVE FUND/TRAVEL
COMPENSATION FUND
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September 15, 1988, in Hong Kong: a Reserve Fund for the purpose of
making ex gratia payments to clients was established.
Compensation scheme is limited to package tours where the travel
agencies contribute to the fund to a maximum of 70% of the published
price of the failed package tour where the claims must first be established
and approved by the Board of Directors of the Travel Industry
Compensation Fund (TICF).
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SOURCE of compensation fund:
(i) contribution from travel agencies in the form of levies computed at
0.15% of each outbound tour fare received,
(ii) financial penalty for the late payment or failure to make due
payment of the levy
(iii) income from investment made out of the fund.
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Msia: MOTAC proposed the Tourism Industry Compensation Fund (TICF)
projected end of 2012. But not implemented till now.
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Due to opposition by the registered travel agencies as TICF is viewed as
unfair as indirectly the law-abiding travel agents are compensating for
the fraud committed by fraudulent travel agents.
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Australia: every travel agency’s contribution to the TICF is fixed at $7,430.00
for principal location and $5,000.00 for branch location irrespective of the
capacity and size of the travel agency’s business scale.
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TICF will no longer in operation in Australia commencing from 30 June 2014
with claims paid until March 2015. Hence, the Australian not for profit
consumer organisation, (previously known as the Australian Consumers
Association) CHOICE urged the Consumer Affairs Ministers in Australia to
reject the proposal to abolish the protection scheme in the new Draft
Travel Industry Transition plan, arguing that the proposed changes will
leave purchasers of fraudulent holiday packages high and dry.
REGULATED MAXIMUM PAYMENT OF
DEPOSIT
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In Malaysia, Regulation 1 of the Tourism Industry (Tour Operating Business
and Travel Agency Business) Regulations 1992 (Standard Terms and
Conditions for Outbound Tour Packages) limits a maximum deposit of 25%
of the outbound tour fare per person be paid as reservation fee.
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It is made clear in the provision that the balance or full payment of such
must be made within 14 days for Free Independent Traveller (FIT) tour
packages and 21 days for Group Tour Packages, as the case may be,
before the date of departure.
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NOT AVAILABLE IN HONG KONG AND AUSTRALIA.
CONCLUSION
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It is often said that travel agent’s legal liability may be difficult to
determine, essentially for the following reasons: the subject-matter is an
intangible experience, the travel agent is selling someone else’s product,
there is a broad range of participants in a single transaction, the supplier
is often located abroad, and there is a complicated array of industry
standards and regulations, both domestic and international.
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Indeed, it is not easy to prove fraud committed by travel agents in every
case and this paper does not provide the answer to the complications of
proving travel agents’ fraudulent practices. However, the paper discloses
the existing regulatory framework in the registration and operation of
travel agencies’ business from the perspectives of three countries,
Malaysia, Hong Kong and Australia.
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The existing framework in these countries which are backed up with the
tribunal system is a reformation to the idea that the travel agency
business is a normal business, just like any other business. The travel
agencies business is indeed a business that is very vulnerable to
fraudulent practices.
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The introduction of special requirements such as membership in travel
agencies associations, mandatory minimum paid-up capital, purchase
of insurance policy for purposes of compensation to consumers,
regulated maximum deposit that can be collected from consumers and
travel compensation fund are proofs that positive steps are taken by the
governments of the three countries to reduce the possibilities and
consequences of fraudulent practices in the travel agencies’ business.
THANK YOU FOR YOUR ATTENTION