Travel Agents Repeal Bill

Second Reading

Adjourned debate on second reading.

(Continued from 3 June 2014.)

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) (15:50): I understand that all second reading contributions have been concluded and I would just like to make a few summary comments and put on record answers to questions that were raised. Can I start by thanking everyone who has contributed to the debate. I am very pleased that, overall, people are supportive of the legislation and I note that the Hon. Stephen Wade has pointed out some of the areas of concern and sought clarification on others, which I will now address.

In December 2012, it was agreed that the Travel Compensation Fund (TCF) could not continue to be the primary vehicle for consumer protection in the travel market. There had been both fundamental changes in the market and the introduction of strengthened legislative protections under the Australian Consumer Law (ACL). I am advised that the remodelling of the TCF, rather than its abolition, was considered and not regarded as an option moving forward to deregulate the industry.

PricewaterhouseCoopers conducted a survey in 2009 that found that only 14 per cent of consumers were aware of the TCF. Aside from its negligible public profile, the benefits of the current scheme are declining due to natural attrition linked with changes in the way consumers purchase travel. Notwithstanding that, an extensive national consumer education program will commence on 1 July. I also understand that client trust accounts, whether or not required by statute, will remain subject to bankruptcy and insolvency laws external to the licensing arrangements in place. As such, I do not consider that the trust accounts of travel agents will be any more likely to be vulnerable to claims after 1 July than they are now. It should further be noted that many remittances are now instantaneous and this is becoming more and more prevalent across the industry.

South Australia had initial concerns with the Travel Industry Transition Plan (the plan). However, these have been addressed with the exception of mandatory trust accounts for participants of the accreditation scheme. South Australia endorsed the plan in light of the general acceptance of the majority of states and territories to endorse it. The government considered that South Australia could have a more substantial and effective influence on the progress of the transitional plan through its different stages and contribute to an education campaign and consumer advocacy by endorsing the plan and being part of the entire process.

The government also recognised that agreement to the plan will ensure that travel agents operating in South Australia are not faced with additional red tape and regulatory burdens as well as ensuring consistency for travel agents that operate nationally. The COAG Legislative and Governance Forum will oversee the components of the plan. However, this does not include the government being involved in an industry-led scheme. Regulators have been closely involved in the development of an Australian Travel Accreditation Scheme (ATAS) code and charter. I can advise that on 8 May 2014, the Australian Federation of Travel Agents (AFTA) published the ATAS Code of Conduct and Charter which is available on the AFTA website.

These documents were reviewed by a national working party made up of representatives from jurisdictions as well as Austrade and Choice. Members of the working party are comfortable that AFTA has addressed all their concerns and that the code and charter achieve the best practice objectives. Voluntary, industry-led regulation has proven to be flexible and a less intrusive means of regulating participants' behaviour.

As the owner of ATAS, the AFTA board has some involvement in the scheme's administration. The changes brokered by jurisdictions have minimised this role. All other decision-making is spread between ATAS and the ATAS Code Compliance Monitoring Committee as an independent review body established to review and determine customer complaints and allegations of noncompliance with the ATAS charter and code.

The monitoring committee can issue binding decisions, including sanctions against the participant. The monitoring committee members, consisting of an independent chair; two consumer representatives nominated by the consumer movement; another representative from industry, commerce and government; and the AFTA CEO are required to make decisions consistent with the ATAS charter and the monitoring committee's terms of reference, which are included in the charter.

When the plan was developed, it was considered that consumers would rely on the Australian Consumer Law for any redress; however, industry has led an initiative to bring to the marketplace a range of insolvency insurances which extend further than the TCF charter. This is a real bonus for the transition to a deregulated model.

Travel intermediaries who wish to become accredited under the ATAS have the option of taking out such insurance as a means of protecting against the impacts of collapse of either their own business or one of their suppliers. Whether a travel intermediary needs to take out such insurance will depend on their business models and the types of suppliers they deal with. This is one of the reasons a voluntary approach may be more appropriate to contemporary industry practices.

Other reasons include that products which are sold by agents may already be covered by an insolvency product, such as scheduled airline failure insurance. Further, some businesses may already have systems in place ensuring that purchases are protected from any business failure. Purchases made by credit card, for instance, can also provide protection of a customer's payment in the event of a non-supply for any reason. In this light, caution is to be exercised before imposing costs on Australian-based businesses compared with their global competitors selling to the same consumers.

For those agents concerned that they may not have insolvency insurance in place, they can recommend to clients that payment be made by credit card in the short term. I am advised by AFTA that insurance quotes the scheduled airline failure insurance and the end supplier failure insurance are two supplier covers that have been available for a number of months now and many businesses have sought quotes.

TAIFI, the travel agent failure insurance product, has been open for only a few weeks now and quotes are being prepared. Turnaround is usually within a week or two weeks if all the requested information is provided by the agent to the insurance broker. A risk assessment is then run across the business before a quote is issued. AFTA and the insurance providers are working hard to ensure that insurance is in place for the agents who have applied.

I understand that it is very hard to estimate what proportion of the industry will take up insurance or self-insurance at this stage. I believe that some travel agents are keeping their cards very close to their chest whilst they seek out commercial solutions. I can confirm that both Flight Centre and Travel Counsellors have advised that they have their own commercial solutions beyond the Gow-Gates offering of insolvency protections.

South Australia should receive approximately 6 per cent of the remaining balance of the TCF. Based on the TCF balance of 31 December 2013, and taking into consideration the moneys allocated to Choice for the consumer endowment and advocacy program and the moneys allocated to the national education campaign, South Australia should receive somewhere between $1.5 million and $2 million.

Moneys returned to the South Australian government will, at this stage, be returned to consolidated revenue, and it is important to note that moneys from the TCF, up to $3 million, have already been allocated to a comprehensive national education program which will commence on 1 July. This will be overseen by consumer affairs agencies nationally. The campaign will highlight the changes to the travel environment and help consumers to understand their rights when buying travel. Each state and territory will support the national campaign locally, incorporating travel messaging into their existing consumer education programs.

In recent months, CBS has provided information to the South Australian travel industry about the changes through direct correspondence to all licensed travel agents and the South Australian Tourism Industry Council. CBS has also published information on its website, including frequently asked questions. I can confirm that TCF coverage will cease as at 1 July 2014; however, the TCF will continue to accept and consider claims until its closure to mid/late 2015 for any claims occurring prior to 1 July 2014. Transitional provisions have been included into the repeal bill to support this position.

I conclude by saying that retaining the current licensing regime for travel agents operating in South Australia will only impose additional regulatory burden and red tape compared with other jurisdictions. Given that many travel agents operate across Australia, it is important that South Australia maintains a competitive business climate and ensures that travel agents operating here are not disadvantaged. Without a national travel compensation fund, it will be crucial to educate consumers about their rights under the Australian Consumer Law, as well as the importance of using reputable travel agents. With those few words, I commend the bill to the council.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. S.G. WADE: I would like to pick up on some of the answers. Could I thank the minister and those advising her for the answers given. I would note first of all that we had bizarre contributions from the Hon. Gerry Kandelaars and the Hon. Tung Ngo. I felt as though, in this case being a government speaker, my contribution was closer to that of the minister's second reading speech and her second reading summing up than that of the two government members we sandwiched. Be that as it may, this is a government that does not have any sense of common direction, so it is hardly surprising.

In terms of the answers, the minister says that the AFTA board will have some involvement with ATAS, and 'some involvement' is the phrase she used. One of the concerns that has been raised with me is whether there will be an assurance that information provided by travel agents to ATAS in the process of accreditation will not be made available to other competitors through the AFTA relationship.

The AFTA board, of course, consists of a range of travel industry participants, and it is of concern to some travel agents that their commercial confidential information is protected, so that was where my question was coming from in relation to being governed at arm's length and also in terms of, shall we say, the general principle of arm's length governance for bodies that have broader regulatory responsibilities. I used the example of the Law Society and its relationship with law claims.

The minister says that there will be some involvement. I seek some greater assurance that, in the work the South Australian government has done with other governments around Australia, they have ensured that there is an appropriate independence in corporate governance structures between ATAS and AFTA.

The Hon. G.E. GAGO: I am advised any ACCMC member with a suspected conflict of interest must exclude themselves from any relevant decision-making process and also that ATAS personnel are bound by confidentiality agreements as advised by AFTA.

The Hon. S.G. WADE: In relation to the ACCMC committee, which the minister has just referred to, I may well have misunderstood what the minister was conveying but I understood her to say that there were five members of the committee, one being an independent chair, two being consumer representatives, one being nominated by industry/government, etc., and one being the AFTA CEO. Could the minister confirm that I have correctly understood what she was conveying? Then I would like to ask a couple of questions about those members.

The Hon. G.E. GAGO: Yes, that is correct.

The Hon. S.G. WADE: In relation to the two consumer reps, how will they be appointed?

The Hon. G.E. GAGO: I am happy to take that on notice and provide an answer. We do not have that level of detail with us today.

The Hon. S.G. WADE: It would certainly be of interest, particularly to the House of Assembly. I ask now the same question in relation to the industry/government nominee.

The Hon. G.E. GAGO: I will take that on notice as well.

The Hon. S.G. WADE: I suppose my next question is going to have a presumption which is based on the answer that has just been taken on notice, but nevertheless let me speculate. I would not be surprised if Choice has a role in the appointment of the consumer representative. Choice, as I understand it, is the successful applicant for the tender for being the consumer rep within the ATAS framework. I am intrigued, considering that as I understand it the consumer protection agencies are stepping back—that is, the nature of industry self-regulation—AFTA and ATAS will have perpetual existence. Is Choice's role as the consumer voice perpetual too? Having won the initial bid, will they always be the consumer voice within the ATAS framework?

The Hon. G.E. GAGO: I will take that question on notice as well.

The Hon. S.G. WADE: If I could come back to the issue of what happens to the TCF money, and let me be a prophet in my own time and predict that the member for Heysen in another place will have comments to make on this. Let's remind ourselves what is happening here.

Over the years, travel agents have paid money into the Travel Compensation Fund on behalf of their clients so their clients can have protection. Governments around Australia, for good reasons, have decided that industry self-regulation is a better way to go but, in the process, they are winding up the fund, putting a relatively small amount into consumer education and a relatively small amount into establishing the industry-led regulation process and, 'Gee whizz, we are going to divvy up the rest of the money amongst ourselves.'

I remind the minister what she told the council, which is that (and I think I am quoting her correctly) it is crucial that we educate consumers. I would have thought that, considering it is consumers' money (that is, that share of the travel agents' resources which can only come from clients) that is now going to be taken into consolidated revenue, it has all the hallmarks of other levies and other funds that are confiscated by this government. As a former chair of Julia Farr, I still hold the government accountable for the confiscation of the community assets in the Highgate Park building.

The government seems to think (and they are not alone because there are governments around Australia that might have similar instances) that they have the right to take into consolidated revenue assets of the community, no matter where they sit. The government might say that it is only $1.5 million to $2 million and what could that do? My understanding is that the money provided to set up the ATAS scheme nationally is about $2.8 million, and I think that $2 million of resources in South Australia towards consumer education or other aspects of promoting and marketing the visitor economy might have actually been a more appropriate use of what, after all, is not the government's money: it belongs to agents.

I appreciate that the minister has advised us what the minister has advised us, but I would ask the minister whether the government is aware of the intended use by other states and territories of their disbursements from the TCF.

The Hon. G.E. GAGO: I have been advised that it is thought that other jurisdictions will do a similar thing and moneys will go into general consolidated revenue funds. However, we would need to check with each jurisdiction to ensure that that is so.

I remind the honourable member that, indeed, it is $2.8 million to set up the ATAS, $2.8 million that was offered to Choice to do the endowment program work, and up to $3 million for consumer agencies in the education program.

The Hon. S.G. WADE: I thank the minister for that. It was not merely a reminder but some information, because I must admit that I had not appreciated the distinction between the two lots of money to Choice. If I could clarify that, I think you said that there is $2.8 million to Choice for the endowment and about $3 million for the consumer education. The consumer education I presume is for the first two or three years after 1 July.

Getting back to the point I was making about AAMC, does the endowment fund suggest that Choice is going to have a perpetual presence using this endowment fund as the consumer voice? I do not want to join dots inappropriately, but I am just trying to differentiate between the uses of the two pools of money.

The Hon. G.E. GAGO: It is doubtful that it would be perpetual, given that they have been given $2.8 million to do that work. The advice I have received is that there is no specific negotiation or discussion about time limits at this point. In terms of the $2.8 million, obviously that will have a life, but there are likely to be activities or programs that come from that, like a website, that obviously will have an element of a perpetual nature to it.

The Hon. S.G. WADE: I thank the minister for that answer and also for the assurance earlier that the ongoing role of Choice will be taken on notice and at least the House of Assembly on behalf of the parliament can be informed.

My understanding, from what the minister said, was that the consumer education element of the transition plan is being handled nationally and, as I understand it, is being overseen by Choice and that CBS's advice within South Australia is only to travel agents. If I have correctly understood that, that is concerning. We appreciate there are the FAQs on the website you mentioned, but I think the Hon. Gerry Kandelaars, the Hon. Tung Ngo and myself and, to be fair, the minister, acknowledged that it is in fact, to use the minister's word, 'crucial' to educate consumers.

In terms of what I have seen, in terms of reform programs, this is a significant challenge for a very dispersed market to be properly informed about; about changes to their cover. I am concerned that perhaps at the CBS level we could be doing more to make sure that South Australian consumers are properly informed.

Clause passed.

Clauses 2 and 3 passed.

Clause 4.

The Hon. S.G. WADE: I just want to clarify the termination date, and that means the date on which the compensation fund is terminated. I gather from what the minister was saying that the government expects that date will be in mid-2015. I just want to clarify, considering the lack of a specific date at this stage, who decides: is it the outgoing board of the TCF?

The Hon. G.E. GAGO: Yes, I certainly did say that the TCF cover will cease as at 1 July 2014. However, the TCF will continually accept and consider claims until it is closer to mid/late 2015 for any claims occurring prior to 1 July 2014, and the transitional provisions have been included in the repeal bill to support that position. I have just been advised, in terms of who decides, it will be the board.

Clause passed.

Title passed.

Bill reported without amendment.

Third 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) (16:21): I move:

That this bill be now read a third time.

Bill read a third time and passed.