You don’t need to lose your prepayment when a tour operator fails. Even when there’s no government protection, you can provide your own safety net at little or no extra cost. And, slowly but surely, government protections are getting better.
By now, most of you have probably read or heard of someone who paid in advance for a tour or cruise, then lost the prepayment because either the tour operator or cruise agency went broke. The most recent example was in Florida, where two of the biggest cruise agencies closed their doors, leaving travelers with neither their money nor their cruises.
How does that happen? Usually, an agency or operator fails because it gets caught in a financial squeeze and falls behind in payments to hotels, airlines and cruise lines. Hoping that an upturn will bail it out, the agency or operator uses current customers’ deposits and prepayments to cover bills incurred for previous customers. Such operators and agencies usually don’t intend to be crooks; they just wind up in trouble because the hoped-for upturn never comes.
Despite decades of problems, legal protections for consumers are meager. Federal law covers only a small segment of the market: tours that use charter airline flights. In those cases, tour operators are required to place customers’ prepayments in an escrow account, to be used only for paying for the charter airline, hotel accommodations, or other services included in the tour package. Although a few crooked operators have managed to misuse those escrow accounts, the Federal protection has pretty well solved the once serious problem of collapsing charter tours.
Unfortunately, tours that use scheduled airlines aren’t covered by the federal law, nor are cruises or bus tours. In those cases, legal protection is available only at the state level. The downside to that situation is that only a few states have such laws. The upside is that several states are moving to improve their consumer protection.
But you needn’t rely wholly on state laws. No matter where you live, you can do a lot to protect yourself:
1. Familiarize yourself with whatever protections are available in your state. Any competent travel agency should be able to tell you. Then take advantage of whatever provisions are available. Unless an out-of-town agency can offer some huge advantage, buy locally-chances are that your own state’s protections will be stronger with a local supplier.
2. If possible, buy your tour from an operator that belongs to an association with a consumer-protection program. The American Society of Travel Agents, the U.S. Tour Operators Association, and the National Tour Association all have programs designed to protect consumers against operator failure.
3. Buy your ticket with a major charge card. Under Federal law, consumers who don’t receive a service purchased on a card can demand a chargeback (cancellation of charges) from the charge-card issuer. For a cruise, ask that the charge be processed by the cruise line, not by the agency.
4. Buy trip-cancellation insurance. For about $5.50 per $100 of tour cost, you can buy insurance that protects you against the failure of a tour operator or cruise agency. Some insurance companies exclude the failure of the agency (retail travel agency or tour operator) that sold you the tour or cruise, so when you buy a tour, buy the insurance from a travel agency; when you buy a cruise, buy insurance directly from the insurance company.
