Presentation on theme: "TRAVEL CONSUMER FRAUD: COMPARATIVE ANALYSIS ON REGULATORY FRAMEWORK AND LEGAL REDRESS IN SELECTED COUNTRIES Associate Professor Dr. Nuraisyah Chua Abdullah."— Presentation transcript:
TRAVEL CONSUMER FRAUD: COMPARATIVE ANALYSIS ON REGULATORY FRAMEWORK AND LEGAL REDRESS IN SELECTED COUNTRIES Associate Professor Dr. Nuraisyah Chua Abdullah Faculty of Law, Universiti Teknologi MARA (UiTM) Shah Alam, Selangor, Malaysia TRAVEL LAW & CONSUMERISM
INTRODUCTION … Tribunal for Consumer Claims in Malaysia : : 947 cases relating to claims against commercial travel agencies 1156 cases concerning umrah and hajj (religious travel). Fraudulent practices in travel packages: common amongst travel agents - Malaysia, Hong Kong and Australia. - false description on the standards of services in the holiday package preventing tourists from shopping where they like overcharging for example, charging money for free services such as a visit to the beach, national park or charging more for services, such as ‘optional tours’.
literatures are scattered. SCOPE: legal framework: (i) registration and (ii) operation of the travel agency business (iii) legal redress in combating the issue of fraud in Malaysia, Hong Kong and Australia.
LICENSING REQUIRMENT Ironically, the registration of travel agencies is only made mandatory in most countries beginning in the 19th Century, for example, under section 12 of the Travel Agents Ordinance of Hong Kong, Section 5(2) of the Malaysian Tourism Industry Act 1992 and section 1(2) of the Queensland Tourism Services Act In Western Australia, all individuals, firms or bodies corporate (companies and other incorporated bodies) who carry on business as travel agents in Australia must be licensed under the Travel Agents Act This includes general sales agents, tour operators, wholesalers and consolidators as well as retail agents.
However, in Western and South Australia, a licence is not required for: (i)agents who make domestic travel arrangements (i.e. for travel within Australia) (ii)whose annual turnover in respect of those arrangements is not more than $50,000 ; (iii)sell tickets, buy for resale or otherwise arrange rights of travel for other people on conveyances that leave and arrive at the same place on the same day (for example, day excursions and sightseeing trips); (iv)sell tickets or arrange travel for other people on a transport that one owns. Non-registration of business by a travel agency is a criminal offence under the respective laws, for example, under section 7(1) of the West Australian Travel Agents Act 1985, an unregistered travel agent shall be subjected to a fine of $ or 12 months’ imprisonment or both, with a minimum fine of $5 000 in the case of a second or subsequent offence. Section 9 of the Hong Kong Travel Agents Ordinance 2002 provides that upon conviction, an unregistered travel agent shall upon indictment be liable to a fine of $ and to imprisonment of 2 years or on summary conviction to a fine of $10000 and to imprisonment of 6 months and the Malaysian Tourism Industry Act 1992, section 5(3) provides fine of RM 50,000 or maximum 5 years imprisonment or both.
One of the many roles of the Travel Agents Registration Board or Department in Australia is to investigate complaints by members of the public against licensed travel agents. In any one year the Board would investigate over 100 formal complaints. Main grounds of complaint: (i) fraudulent practices of travel agents including variation of Tour Itinerary without the client being notified; (ii) increase in the price of the tour shortly before departure; and (iii) misrepresentation of facts in brochures and advertisements.
Travel Agents Registration Board has no power to fine a licensee or order it to pay compensation to a member of the public, it can take action against the licence of a licensee. Compensation, the Board can direct such person to the Consumer Claims Tribunal which has the power to grant an injured party compensation. Malaysia: Complaint Management and Consumer Service under the Corporate Communications Unit, Ministry of Tourism; Licencing Department of the Ministry of Tourism: could decide on the renewal, non-renewal or cancellation of a travel agent’s licence in the event of fraudulent practices committed by travel agents. This is also the position in Hong Kong.
REQUIREMENT OF MEMBERSHIP IN TRAVEL AGENCIES ASSOCIATIONS Malaysia and Hong Kong: travel agents must secure membership in registered travel agencies associations in order to qualify for application as travel agents. In most countries, there are many travel agencies associations. Example: Msia: (i) Malaysian Association of Tour and Travel Agencies (MATTA), (ii) Malaysian Chinese Tourism Association (MCTA) and (iii) Bumiputera Travel and Tour Agents Association of Malaysia (BUMITRA). Australia: not a requirement.
Hong Kong : (i) Hong Kong Association of Travel Agents Limited (HATA) (ii) Federation of Hong Kong Travellers Limited; (iii) International Chinese Tourist Association Limited; (iv) Society of IATA Passenger Agents Limited (SIPA); (v) Hong Kong Taiwan Tourist Operators Association Limited; (vi) Hong Kong Association of China Travel Organizers Limited (who are initial subscribers of the Travel Industry Council of Hong Kong (TIC)).
Importance of membership: (i) Infringement of Code of Practices of the associations: eg. Fraud warrants proceedings before the disciplinary board. (ii) Board may, terminate the company’s membership. (iii) Associations: eyes and ears of the travel industry and the Ministry of Tourism.
Hong Kong: Society of IATA Passenger Agents Limited (SIPA): requires that its members be International Air Transport Association (IATA) accredited agents. - members will have had to satisfy stringent IATA accreditation criteria - an applicant must be a member of the Travel Industry Council of Hong Kong (TIC).
Travel Industry Council of Hong Kong (TIC): (i) self-regulating organization of the travel industry (ii) responsible for improving trade practices; (iii) formulating and enforcing codes of conduct and directives for the industry; (iv) collecting statutory levies and handling public complaints and enquiries.
MINIMUM PAID-UP CAPITAL AND INSURANCE Msian Licensing requirement : (i) Local outbound travel agency company: minimum paid up capital of RM200, 000. (ii) Local inbound travel agency companies : minimum paid up capital required is RM50,000 for rural tours and RM200,000 for city tours. Hong Kong: (i) limited company should have a paid-up capital of not less than $500,000 and the paid-up capital for each branch office is $250,000. (ii) sole proprietorship or partnership : no requirement on paid-up capital but a sum of $150,000 should be paid to the TIC as a security deposit.
Unique feature of the Hong Kong: (i)least a manager of two years’ relevant practical experience and another full-time staff in the operation of such business. (avoiding fraudulent practices) (ii) outbound travellers: - insurance policy for a value of RM100, 000 or - deposit with the Commissioner of Tourism the sum of RM20,000 or - furnish to the Commissioner a bank guarantee in the amount of RM100,000 for purposes of compensation or refund. WEAKNESS: No inbound package tour law: absence of legal requirement for compensation scheme
TRIBUNAL FOR FRAUDULENT TRAVEL CLAIMS Claim Compensation in court: expensive Tribunal: viable and much cheaper alternative for the forum to settle consumer claims against fraudulent holiday packages offered by travel agencies. Malaysia and Hong Kong: Tribunal for Consumer Claims: No representation by a lawyer
WEAKNESS: not easy to proof fraud by consumers due to lack of skills CONTARY: Australia: allows representation (i) New Zealand Disputes Tribunals Act 1988 (NZDT) (ii) New South Wales Consumer, Trader and Tenancy Tribunal (NSWCTTT) allow representation by others: if parties can obtain permission/approval from the NZDT and the NSWCTTT
Queensland Commercial & Consumer Tribunal Act 2003 (QCCT): may allow such representation in the interest of justice at two stages, at mediation and at pre-hearing. Silent as to ‘interest of justice’ fraud cases: should be included in the category of cases where consumers should be allowed legal representation for the interest of justice.
Under the regulation 6(1)(m)(iii) of the Tourism Industry (Tour Operating Business and Travel) Regulations 1992, the Commissioner of Tourism: adjudicator in determining the quantum of compensation to be awarded to travellers in cases involving breach of the terms and conditions stated in the tour brochure. The award of compensation is made out of the insurance policy, cash deposit or bank guarantee which the travel agencies are required to secure before they may commence travel agency business. But seems insignificant as consumers tend to bring the disputed fraudulent cases to the Tribunal for Consumer Claims. NOTE: In case of insolvent or bankrupt: consumer without a remedy.
TRAVEL RESERVE FUND/TRAVEL COMPENSATION FUND September 15, 1988, in Hong Kong : a Reserve Fund for the purpose of making ex gratia payments to clients was established. Compensation scheme is limited to package tours where the travel agencies contribute to the fund to a maximum of 70% of the published price of the failed package tour where the claims must first be established and approved by the Board of Directors of the Travel Industry Compensation Fund (TICF).
SOURCE of compensation fund: (i) contribution from travel agencies in the form of levies computed at 0.15% of each outbound tour fare received, (ii) financial penalty for the late payment or failure to make due payment of the levy (iii) income from investment made out of the fund. Msia: MOTAC proposed the Tourism Industry Compensation Fund (TICF) projected end of But not implemented till now. Due to opposition by the registered travel agencies as TICF is viewed as unfair as indirectly the law-abiding travel agents are compensating for the fraud committed by fraudulent travel agents.
Australia: every travel agency’s contribution to the TICF is fixed at $7, for principal location and $5, for branch location irrespective of the capacity and size of the travel agency’s business scale. TICF will no longer in operation in Australia commencing from 30 June 2014 with claims paid until March Hence, the Australian not for profit consumer organisation, (previously known as the Australian Consumers Association) CHOICE urged the Consumer Affairs Ministers in Australia to reject the proposal to abolish the protection scheme in the new Draft Travel Industry Transition plan, arguing that the proposed changes will leave purchasers of fraudulent holiday packages high and dry.
REGULATED MAXIMUM PAYMENT OF DEPOSIT In Malaysia, Regulation 1 of the Tourism Industry (Tour Operating Business and Travel Agency Business) Regulations 1992 (Standard Terms and Conditions for Outbound Tour Packages ) limits a maximum deposit of 25% of the outbound tour fare per person be paid as reservation fee. It is made clear in the provision that the balance or full payment of such must be made within 14 days for Free Independent Traveller (FIT) tour packages and 21 days for Group Tour Packages, as the case may be, before the date of departure. NOT AVAILABLE IN HONG KONG AND AUSTRALIA.
CONCLUSION It is often said that travel agent’s legal liability may be difficult to determine, essentially for the following reasons: the subject-matter is an intangible experience, the travel agent is selling someone else’s product, there is a broad range of participants in a single transaction, the supplier is often located abroad, and there is a complicated array of industry standards and regulations, both domestic and international. Indeed, it is not easy to prove fraud committed by travel agents in every case and this paper does not provide the answer to the complications of proving travel agents’ fraudulent practices. However, the paper discloses the existing regulatory framework in the registration and operation of travel agencies’ business from the perspectives of three countries, Malaysia, Hong Kong and Australia.
The existing framework in these countries which are backed up with the tribunal system is a reformation to the idea that the travel agency business is a normal business, just like any other business. The travel agencies business is indeed a business that is very vulnerable to fraudulent practices. The introduction of special requirements such as membership in travel agencies associations, mandatory minimum paid-up capital, purchase of insurance policy for purposes of compensation to consumers, regulated maximum deposit that can be collected from consumers and travel compensation fund are proofs that positive steps are taken by the governments of the three countries to reduce the possibilities and consequences of fraudulent practices in the travel agencies’ business.