Why a Travel Trust account?

November 19, 2013 in Uncategorized by PTTadmin

What are the reasons that Travel Trust accounts are becoming so popular?

The Civil Aviation Authority is increasingly endorsing and promoting the use of Trust accounts.

The licensing alternatives are Expensive and can be Administratively Burdensome. This is generally the CAA bonding alternative where fees and premiums of financial protection products can be prohibitively expensive and difficult to secure. The financial stipulations in terms of balance sheet free assets and bonding requirements and other means of guaranteeing Consumer’s Funds means that there is a risk of over-trading since Businesses can be under capitalised; and with that risk, insufficient protection of Consumer Funds. Trust accounts are not subject to the annual renewal procedure and difficulties experienced in these alternatives.

Travel Trusts can provide a financial protection solution for all arrangements requiring protection. This not only makes the accounting simpler but is also much clearer for a Travel Company’s customers.

Merchant Acquirers prefer Travel Trust accounts and may offer lower transaction rates. Merchant Acquirers demand Companies that do not maintain Trust accounts to obtain additional Bonds and/or agree to deferral periods which can exceed 21 days and greater; that causes cash flow difficulties for Travel businesses. Merchant Acquirers view Trust accounts as a favourable means of financial protection due to the lower risk and clear ring fencing of Consumer Funds.

Travel Trusts offer greater security for Consumer Funds. When set up and operated correctly, Trust accounts offer excellent security for funds placed in them. This is true whilst the Travel Company is trading and in the unfortunate situation of company failure.

Travel Trusts can offer greater indirect security to Suppliers. Whilst Suppliers are not directly protected, the existence of Trust accounts should provide them with a greater level of comfort and security especially for Trust accounts overseen by an Independent Trustee.