Fortune tellers at state fairs are probably subject to more regulation than sellers of travel: agents, tour operators, bus companies, cruise companies, hotels and others. As Mike Spinelli, president of the American Society of Travel Agents, who heads Merrimac Travel in Lowell, Mass., puts it: “A travel agent cannot give haircuts in Massachusetts, but a barber there can open a shop called Nails and Sails and sell travel.”
Spinelli is worried about this lack of governance for a business that is founded almost entirely on promises and trust: People get a brochure and write out a check on the basis of a color picture and a schedule for a year from now.
“When money is paid for services to be delivered at a later date, you invite fraud,” Spinelli said. “It’s so easy to do a scam. We are sitting on a time bomb.”
There are only 12 states with any hint of a legal requirement on travel sellers beyond their general business laws; several other legislatures have recently picked up the idea of regulation and set it down again quickly when faced with vigorous lobbying on the part of the travel industry. But Spinelli predicted that in five years, there would be industrywide regulation of travel sellers.
As it is now, the standard text “Travel Law” by Thomas A. Dickerson (Law Journal Seminars-Press) notes that travel is “to a large extent unregulated, unlicensed and operates under the principle of caveat emptor.” One of the few federal laws that apply specifically to travel is a Department of Transportation rule for public air charters, which requires that operators register their plans and hold the money in escrow until the trip is delivered. This rule creates a barrier to the sorts of frauds Spinelli envisions.
Most of the nationally reported frauds and uninsured business failures have involved tour operators rather than travel agencies; when a tour operator defaults, travel agencies lose along with the consumers.
Travel agents are the gatekeepers. Any laws holding them liable should make them more vigilant about their wares and less likely sell the tours of wobbly companies: many lawsuits against agencies have hinged on whether they could have known or should have known that the reputation of the supplier was uncertain.
Travel agents and tour operators have mostly resisted state and federal controls. And now that the airline industry has been deregulated for almost 20 years, it sounds perverse to think of applying rules to a business as disparate as selling travel; any rule would likely apply to senior citizen clubs that put together trips as well as giant tour companies. But for a variety of reasons, regulation may be on the way.
Regulation implies required credentials or licenses, some form of bonding and use of escrow accounts. These take time and trouble — and most particularly, bonding or escrow accounts require an agency or an operator, particularly one working on a thin profit margin, to freeze up some of its income.
Right now, Rhode Island, with 109 travel agencies, is the only state to require an examination before an agent can hang out a shingle. California, with the most agencies of any state (5,590 of the 22,874 agencies in the United States that are approved to sell airline tickets), in 1995 put into effect a law requiring registration, with provisions to protect consumers who live in the state and do business with sellers registered to sell there. It includes a restitution fund.
Florida, Hawaii, Illinois, Iowa, Massachusetts, New York, Ohio, Oregon, Virginia and Washington are the other states that regulate the travel business to one degree or another, with requirements for registration, fairness in advertising or disclosure of possibly negative information to prospective clients or civil remedies in cases of fraud.
But the laws other than California’s and Rhode Island’s are merely “sops,” in the appraisal of Dickerson. He says that nine states’ laws exempt large groups of travel sellers from coverage, for instance, travel agents, tour operators, airlines, cruise lines, hotels and motels.
States often grant exemptions to organizations that belong to the Airlines Reporting Corp., the clearinghouse for agency sales of airline tickets and commission payments. Travel agencies must belong in order to sell airline tickets. The corporation requires members to post bonds and will void credentials when they fall into arrears. But such agencies do fail and money does disappear before the gate closes.
To be sure, the industry has some protections, but when real fraud takes place, there is little for non-Californians to do short of going to court. A standard piece of advice is to buy a tour only from a member of the United States Tour Operators Association.
To join, members must post a $1 million bond, letter of credit or certificate of deposit against the possibility of consumer losses. When the group had a $5 million group policy to cover all members, the association just squeaked through in a couple of years of heavy defaults.
Another piece of advice is to look for the label of the American Society of Travel Agents, which has a code of ethics for its 11,911 member agencies. It has surety requirements for its 4,402 allied members, tour operators and the like. For its agencies, it has a consumer affairs department that works at resolving complaints, but it often finds that agencies with an ASTA sticker on their doors and logo on their letterheads have not paid dues. In such cases, the organization cannot help.
Spinelli says that ASTA neither opposes nor supports state laws because the organization is so divided.
A growth in what the travel industry calls “card mills” may advance the regulation Dickerson wants and Spinelli expects. These organizations, often pyramid schemes, sell dubious accreditation to would-be travel agents. The creators of these documents, about 50 nationally, sell them on the basis that the holder can take steeply discounted or free familiarization tours, known as “fam tours,” or, typically, sell the bogus documents to still other unsuspecting targets. In legal cases so far, purchasers of these documents have reported receiving no training at all.
On this issue, ASTA hears a clear voice from its enraged membership, which sees business lost, its reputation damaged and its fam tours being distributed to the unqualified. This, of course, leads to the question of what is a qualified travel agent, other than someone registered in one of eight states: California, Hawaii, Florida, Ohio, Oregon, Rhode Island, Virginia or Washington?
There is a card issued by the International Airlines Travel Agent Network on the basis of a minimum annual income from the sale of travel. One can be a “certified travel counselor” as a result of taking courses from a Massachusetts institute, but this is the equivalent of an advanced degree, and not an entry-level qualification.
Mobilized to keep out the unqualified, ASTA has prepared model legislation to allow any state to prevent the sale and use of fraudulent identification.
For information about ASTA members, call 703-739-8739 or call up its Web site at www.astanet.com.
