The mess the CAA and ABTA have jointly managed to make of the collapse of Freedom Direct seems to get worse and worse.

Many customers trying to get their money back from the CAA were pointed towards ABTA, who then pointed them towards their credit card companies. This has angered the credit card companies and it does beg the question, what is the point of ABTA protection? Also, why is ABTA bonding so expensive if they are going to hide behind the credit card companies in the event of any failure?

ABTA are now saying they are the customer protector of last resort, but this seems to be news to the credit card companies. There is even talk of credit card companies threatening to stop working with the travel industry.  This is unlikely, given how much money they make from travel, but it is not inconceivable that the credit card companies will toughen up the terms offered to travel companies and make it very difficult for travel start-ups to get any terms whatsoever.

The whole mess of financial protection for consumers needs to be sorted and sorted soon.

April saw three well-established tour operators in three different countries go under and leave customers in very different situations. Freedom Direct (UK), Conquest Vacations (Canada) and Happy Vacations (USA) had been trading for 12, 37 and 40 years respectively, but all found April 2009 to be a month too far. So what has been the aftermath in each case?

Hawaii specialist Happy Vacations appear to have had no bonding and have therefore left a large number of customers losing their money. This has resulted in people in resort being asked to pay for accommodation that they had already paid for. Hotels have said they will not honour any Happy Vacation bookings. Happy Vacation customers are left having to go through their credit card company, claim off the bankruptcy cover on their travel insurance or try to file through Chapter 11 bankruptcy.

In Canada, the failure of Conquest Vacations caused a lot of problems initially with hotels in Mexico taking an aggressive approach towards holidaymakers and even changing the locks on rooms with holidaymakers belongings inside and not letting them inside until they pay for their stay (again). Apart from these initial problems, everything looks to have been fairly straightforward. Conquest were bonded through TICO who have said they will cover anyone who cannot claim their money back through their credit card company and have said they will refund anyone made to pay for accommodation in resort. This appears to be the only area where the bonding may have failed with some hoteliers not accepting TICO’s guarantee of payment. Conquest employees even came in to work unpaid after they had been laid off to try and help out customers.

Which brings us to the mess of Freedom Direct. Anyone who believes the current bonding provisions for holidays in the UK are satisfactory only has to take a look at what has happened at Freedom to admit they are wrong. On the face of it, anyone booking through Freedom Direct would have understandably believed their money was safe, with Freedom offering both ATOL and ABTA protection.

However, the initial confusion has now been replaced by anger and resentment as many customers are finding hurdles in their way to achieving a satisfactory settlement. The name and intellectual property of Freedom Direct have now been bought by Hays Travel and they have offered to try and help any Freedom Direct customers. Most of the problems stem from the fact that, as Hays puts it:

Freedom Direct “contracted flights, transfers and accommodation, directly with suppliers but did not bond the holiday with the Civil Aviation Authority as an ATOL package……Subject to a detailed review of your file in conjunction with yourself and one of our consultants it appears that your flight & transfer are safe and you will not be out of pocket. Unfortunately the amount you have paid for accommodation appears to be lost.”

It appears a lot of customers have been affected by this particular scenario. One of the main problems is that Freedom Direct booked parts of its packages through outsourced suppliers such as Med Hotels. Customers trying to reclaim these elements from ABTA are being told they cannot do so as the supplier should honour the booking and reclaim the money through ABTA. Suppliers are refusing to do this, saying that by the time they have honoured bookings that they have received no payment for, made the claim through ABTA and received the payment, they themselves will be out of business.  The credit card companies aren’t keen to get involved. All of which leaves customers with flights that are valid, but no hotel or transfers and the likelihood of legal action as the only recourse in order to get their money back.

Of the three companies, whose customers have fared the worst? Some may say it is those of Happy Vacations, but many will have booked through Freedom Direct in the belief that their money was safe only now to find out otherwise.

It’s bad news if the company you have booked your holiday with goes under. It’s even worse if they do so on a Friday, because the people who can answer your queries and provide assistance (ABTA and the CAA) have all gone home for the weekend.

In the case of Freedom Direct it seems that many worried customers struggled to find anywhere to get answers and many turned to Darren at Travel Rants. Darren has done a tremendous job trying to provide answers for people, but it shouldn’t fall to him to do so.

Unfortunately for ABTA and the CAA, we live in times when people want instant answers and an emergency hotline or even just email support really should be provided.

The Daily Mail says Freedom Direct have left 200 Britons ‘stranded’. The CAA says all 200 will be able to complete their holidays and fly home as normal.

Are they really stranded or was the “DAILY MAIL REPORTER” just looking for a nice headline that could include the word Britons?

Another day, another couple of tour operators bite the dust. In Canada, Conquest Vacations has ceased trading after 37 years and in the UK, Freedom Direct closed its doors after 12 years.

Freedom Direct appeared to be a fairly safe company. With a strong turnover, and respectable profits in 2007, the company seemed to be looking forward with the re-launch of its website just a month ago. However, they were clearly working on paper thin margins and the CAA  saw something which made them take the decision not to renew their ATOL license at the start of the month and 16 days being unable to trade was all it took to drive Freedom into insolvency.

I have little knowledge of Freedom Direct or its business. However, I think the CAA really should look at when it renews its licenses. The policy of renewing licenses in April is of little use to anybody. Consumers, employees of Freedom Direct and the CAA have now all suffered as a result of the CAA’s decision to play Kingmaker with Freedom. That’s not to say that it was the wrong decision, the CAA can only renew licenses to financially viable companies. It is the timing of the decision that causes unnecessary repercussions.

By renewing (or not) licenses in April a large majority of a company’s bookings for the year will already be taken. This has harmed the CAA itself as Freedom Direct was only bonded to the tune of £750,000, which could leave the CAA with a shortfall of £1.25m to cover. It also doesn’t help consumers who have booked their holidays and now have to rethink.

Just before Easter does appear to be one of the most illogical times to end a travel company. Freedom Direct probably has a large number of customers in resort at this moment. Why not renew licenses at the start of November? This time of year is very quiet for travel, the CAA can assess the summer’s trading of each company and can have more recent accounts to look at. This would mean that a vast number of bookings wouldn’t be made in the busy January period, only to be cancelled.

There may well be a logical explanation for renewing ATOL licenses in April, but I can’t think of one. If you know of any reasons, please let me know.