Travel Agents Repeal Bill

Introduction and First Reading

The Hon. G.E. GAGO (Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for the Status of Women, Minister for Business Services and Consumers) (17:12): Obtained leave and introduced a bill for an act to repeal the Travel Agents Act 1986. Read a first time.

Second Reading

The Hon. G.E. GAGO (Minister for Employment, Higher Education and Skills, Minister for Science and Information Economy, Minister for the Status of Women, Minister for Business Services and Consumers) (17:13): I move:

That this bill be now read a second time.

This bill will repeal the Travel Agents Act 1986 and implements a key recommendation in the national Travel Industry Transition Plan approved by a majority of state and territory governments on 7 December 2012. The bill illustrates the South Australian government's ongoing commitment to remove unnecessary red tape for business and promote efficient and adaptable regulation.

The transition plan recommended sweeping changes to existing travel agents regulation which has been in place since 1986, following the introduction of a cooperative scheme for the uniform regulation of travel agents, known as the national scheme. The terms of the national scheme require jurisdictions to enact uniform legislation requiring travel agents to be licensed and for those agents to become and remain members of the Travel Compensation Fund, or TCF. The TCF monitors the financial position of travel agents and administers compensation to consumers who have suffered financial loss because their travel agent has failed to pay a travel or travel-related service provider on their behalf.

Now, after two decades in operation, the national scheme has steadily become ill-suited both to modern industry practices and to how consumers purchase travel today. The rise of electronic commerce, in particular, has fuelled the growth of direct distribution channels. Making travel arrangements is now predominantly an online business, with consumers cutting travel agents out of many transactions.

It is now estimated that two-thirds of travel and travel-related expenditure—or $18 billion out of $27 billion—is now made without relying on a travel agent. Growth forecasts predict that this trend is likely to continue. As a result, a significant number of consumer transactions are currently falling outside the scope of this existing regulatory scheme and the pool of consumers who are eligible to access compensation by the TCF is now shrinking. However, the compliance burden associated with satisfying the TCF's prudential oversight requirements remains high relative to its declining benefit to consumers. In March 2011, PricewaterhouseCoopers estimated the cost to industry of complying with the TCF's requirements alone at around $19.3 million; in 2012, KPMG put this cost at $18.4 million.

The industry itself is also increasingly globalised, with many overseas players entering the local market, bypassing the national scheme altogether. Recent collapses of well-established local agents controlled by offshore corporations indicated how complex ownership arrangements are undermining the effectiveness of the TCF's prudential oversight. These are circumstances which the national scheme cannot prevent and future similar incidents are not unlikely.

In addition to its shrinking coverage, the national scheme also raises concerns about regulatory duplication. Travel agents—particularly those that are incorporated or publicly listed—are already subject to financial controls under laws of general application and under industry-led mechanisms, such as accreditation obtained through the International Air Transport Association, the IATA. In practice, these controls cover the majority of the travel agent market, which is dominated by a small group of large companies.

It was in light of these challenges that state and territory consumer affairs agencies developed a Travel Industry Transition Plan, taking into account two independent cost-benefit analyses, and two rounds of public consultation. The transition plan envisages a regulatory scheme for travel agents informed by contemporary market conditions. These reforms consist of two key changes to be implemented by the end of 2015.

The first change removes the TCF's prudential supervision function and puts measures in place that would trigger the closure of the fund. This was achieved through changes to the TCF's governing trust deed on 1 July 2013. The second change involves repealing travel agents' licensing legislation by 1 July 2014. This bill will achieve this requirement and will also preserve, for a limited time, certain powers relating to the TCF. These powers provide for additional matters that are not included in the TCF's governing deed, such as the right of the TCF trustees to sue and be sued in the name of the TCF.

Other provisions that will be preserved are the minister's original power to declare the TCF as an approved compensation scheme. The limited continuation of these provisions is required in order to align with the TCF's termination date. This is currently either 31 December 2015, or as soon after 30 June 2015 as the TCF's obligations are met and the fund is officially closed.

Removing the national scheme will not leave travel agents unregulated and consumers without redress. The bill will enable fuller reliance on the Australian Consumer Law and existing company laws, as well as industry-led regulatory mechanisms and remedies such as credit card charge-backs.

A key advantage of the ACL is that it applies existing levels of consumer protection to transactions with all travel agents as well as travel providers. Complementing these measures will be a new industry-led accreditation scheme, to be administered by the Australian Federation of Travel Agents, or AFTA. The scheme is required to be implemented from 1 July 2014, coinciding with the proposed commencement date of the bill.

With the help of a one-off grant of $2.8 million, funded by the TCF, AFTA has significantly progressed its voluntary scheme. It has also negotiated with a UK insurer, International Passenger Protection, to introduce new insurance products into the Australian market covering defaults by both travel agents and suppliers. Such developments have not been possible in the presence of the national scheme, with travel agents already subject to TCF and licensing costs. TCF funds will also be used to support the creation of a consumer voice.

The transition plan recommended that a one-off grant be made for the purposes of consumer research and advocacy to assist in empowering consumers who transact within a globalised travel industry. CHOICE has been the successful tenderer to undertake this project.

The bill is the culmination of a lengthy process of collaborative reform that has been in place since early 2009. All jurisdictions are cooperating to achieve the passage of similar legislation within the required time frame. The state of Victoria passed its repeal legislation in March 2014; New South Wales and the Australian Capital Territory have introduced their repeal bills and expect them to be passed by both houses in May; and Queensland expects to have its repeal legislation passed by 1 July 2014.

The bill will enable travel agents to transition into an environment that is appropriate for contemporary market conditions and existing regulatory coverage. It will also enable an experienced, well-established industry to play a central role in overseeing the activities of its representatives in the absence of a more prescriptive regulatory framework. Importantly, the bill will help place the Australian Consumer Law centrally as the most appropriate form of protection for consumers and regulation for travel agents, both at present and in the foreseeable future. I commend the bill to the house. I seek leave to have the explanation of clauses inserted in Hansard without my reading it.

Leave granted.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause provides the short title.

2—Commencement

This clause provides for the commencement of the Act and ensures that, even in the event that the Act is assented to by the Governor after 1 July 2014, the Act commences from 1 July 2014.

Part 2—Repeal of Travel Agents Act 1986

3—Repeal of Act

This clause repeals the Travel Agents Act 1986.

4—Transitional provisions

This clause provides transitional provisions to preserve specified sections of the Travel Agents Act 1986 relating to the administration of the Travel Compensation Fund until the termination of the trust deed according to its terms, as follows:

(a) the approval of the trust deed by the Minister made under section 19 will continue to apply;

(b) section 21, which permits appeals to the District Court against certain determinations of the trustees, will remain in force;

(c) section 25, which provides that the trustees may enforce rights (subrogated to the trustees due to payment from the compensation fund) against the directors of a licensed travel agent (or former licensed travel agent) that is a body corporate, will remain in force until the termination date in relation to a claim made against the compensation fund in respect of matters occurring before the repeal date;

(d) section 26, which provides that the trustees may sue and be sued under the name 'The Travel Compensation Fund', will remain in force in relation to any legal proceedings brought by or against the trustees before the termination date in relation to a matter occurring before the repeal date.

Debate adjourned on motion of Hon. A.L. McLachlan.

At 17:23 the council adjourned until Tuesday 3 June 2014 at 14:15.