Consumers should help fund Ontario’s Compensation Fund, says the Canadian Association of Tour Operators, echoing long-held views by the retail industry that its members should not be solely responsible for mandatory consumer protection against supplier failure in the province, and equally that the Fund is insufficient to meet current needs.

CATO’s call comes as the Travel Industry Council of Ontario (TICO) continues a comprehensive review of its overall funding framework, including the “comp fund,” begun last year.

Association chair Brett Walker, speaking “on behalf of and supported by all CATO members” says, “CATO has long advocated for changes to TICO’s consumer Compensation Fund… It’s time for consumer protection that’s commensurate to consumer risk and without all the caps and gaps. It’s time for government and TICO to get this right and to provide consumers (with) the protection they deserve, and no doubt believe they have when booking with an Ontario registrant.”

In a statement, Walker said, “We (CATO) believe the consumer Compensation Fund should – at a minimum – be co-funded by consumers. A consumer contribution is the only means to grow the Compensation Fund sufficiently to account for current realities and to ensure consumers are fully protected, without any caps, in the event of a registrant failure. A consumer contribution is also the surest way to heighten awareness of the Fund’s consumer protection and the importance of booking with a TICO registrant.”

Currently the Compensation Fund sits at approximately $23.5 million, but, citing a review by Deliotte in 2018, CATO says the Fund should be upwards of $50 million.

But CATO contends that “even a Fund this size still required the retention of consumer and per event caps on claims, as well as not accounting for any large registrant failures or catastrophic losses. The current Fund is roughly half the amount of the minimum target Fund size suggested by Deloitte… Not only is the size of the Fund wholly inadequate, but consumers should also not be victims of the imposed caps on claims. Set decades ago, these caps were never indexed, and the rapid rate of inflation exposes consumers to ever increasing risk.”

Another issue, says CATO, is that claims by consumers are also hampered by the Fund being restricted to the payer of last resort. “Not only does this subject consumers to an exhausting claims process prior to ever making a legitimate claim against the Fund, but such subrogation of responsibilities also exposes registrants to higher costs to banks and other payment processors as well as having to pay into the Fund – hardly creating a competitive landscape for tour operators and other travel businesses in Ontario.”

CATO further claims that TICO draws from the Fund for certain operating expenses related to the Fund, “thus depleting the fund and further reducing the extent to which consumers are protected by the Fund.”

Asked to comment on CATO’s statement, TICO president and CEO Richard Smart told Travel Industry Today, “We understand this is a priority for the industry and we remain open to all ideas to modernize TICO’s funding framework.”

Smart says its current review process, which is being led by Ontario-based consulting firm Optimus SBR, is TICO’s largest since inception, and added, “Stakeholder input is an integral part of the process, with many voices, including the major travel associations all having a voice in this process. We are committed to developing a fair and modern funding model that reflects cost recovery, delivers value to stakeholders, and continues to keep consumer protection at the forefront.”

In its most recent Registrar Bulletin (Jan. 11), TICO cited ongoing review activities as having included stakeholder engagement (from tour operators, host agencies, independent travel advisors, consolidators, as well as travel associations such as CATO, ACTA and the OMCA) to obtain input on the strengths, challenges, gaps, and constraints of the current funding framework. Registrant and consumer surveys were also conducted, and other jurisdictions studied for comparative models.

TICO says the focus of the review has now turned from assessing the current framework to forming recommendations for a future approach for the funding framework and Compensation Fund, a process that is expected to be complete by Fall for submission to the government.

However, while CATO acknowledges the scope of the review, Walker says “such engagements in the past have produced little if any results.”

He concludes, “Consumers and registrants deserve a consumer protection fund commensurate to consumer risk. This can only be achieved through a funding model that includes a consumer contribution as well as minimizing any caps and gaps that expose consumers to losses. The current fund is wholly inadequate, and the status quo is simply unacceptable… Enough is enough!”