Bad Trip : Law Mandating Restitution Fund for Victims Leaves Some Travel Agents Feeling Cheated

A new state law to protect consumers from travel scams has some travel agents grousing that they’re the ones being ripped off--and they’re pushing to amend legislation that’s barely four months old.

“We’re trying to head off a revolt,” said Villa Park travel agent Bev Zukow, president of the Orange County chapter of the American Society of Travel Agents, or ASTA, one of the nation’s largest travel trade groups.

At the center of the flap is a new industry-financed consumer restitution fund that will compensate California residents who lose money in travel schemes or to operators that go belly up.

The California Sellers of Travel Act, which went into effect Jan. 1, requires every travel agent, tour operator, ticket broker or other travel intermediary who collects money from the public to register with the state attorney general’s office, spell out specific terms of travel packages and meet state requirements for handling customers’ funds.

The law also requires travel sellers to pay fees of $200 per sales location to finance the $1.6-million restitution fund established under the new law.

The state’s major travel trade associations endorsed the legislation, designed to bolster consumer confidence in an industry rocked in recent years by high-profile scams. Trouble is, support appears weaker among the rank and file.

Thousands of agents have yet to register with the state or contribute to the fund, which is now about $500,000 short of the statutory minimum. Atty. Gen. Dan Lungren has vowed to track down the scofflaws. But in the meantime, travel sellers who have already complied may have to fork over an additional $110 each to put the fund over the $1.6-million minimum the new law requires.

“It’s not fair,” said Dorothy Krill of Krill Tours & Travel in Laguna Beach. “They are penalizing honest agents when they should be going after the deadbeats.”

Led by ASTA and supported by the attorney general’s office, the travel industry is trying to persuade state legislators to scale back the minimum required balance to $1.2 million. That would preclude the need to hit registered travel sellers with an additional assessment, since the state expects to receive $100,000 soon from stragglers. The fund now has about $1.1 million.

But the flap underscores the difficulty of regulating an industry tarnished by fast-buck artists and hucksters who continue to make life tough--and now more expensive--for honest travel agents.

“There is a crying need for legitimacy in the travel business,” said Ellie Knight, a Brea-based travel management consultant. “The question is: How do you make [the regulation] fair?”

California’s law, the first of its kind in the nation, is the outgrowth of years of wrangling between industry leaders and legislators over how to clean up an industry rife with scams that cost consumers nationwide an estimated $12 billion a year.

California’s tourist industry suffered tremendous embarrassment two years ago when scores of University of Wisconsin fans bought Rose Bowl travel packages that didn’t include tickets to the game. Likewise, the 1989 collapse of an Encino travel agent made big headlines when hundreds of travelers were left stranded around the world.

“Everyone agreed we needed to do something,” ASTA’s Zukow said.

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Yet only about 5,000 of the estimated 8,000 travel sellers doing business in the state have bothered to register under the new law, creating the shortfall in the restitution fund that was supposed to be the principal security blanket for California consumers.

State officials acknowledge their estimates of the number of travel sellers may have been a bit too high. Industry watchers say some agents might not realize they must register. But others figure that many travel sellers, facing increased competition and falling profit margins, are simply ignoring the new regulations as cumbersome and expensive.

Under the law, travel sellers are required to pay a $200 start-up fee for the restitution fund, $25 to cover the fund’s first-year administrative fees and a $100 annual registration fee to the attorney general’s office.

The Travel Consumer Restitution Corp., the nonprofit agency that oversees the restitution fund, calculates that registered agents would have to chip in an additional $110 each to make up the $500,000 shortfall.

Depending on how many consumers file claims, travel sellers can be assessed up to $400 annually in subsequent years to replenish the restitution fund.

“I think a lot of agents are just fed up,” Krill said. “They’re struggling to make ends meet as it is.”

Indeed, a Republican-led effort to scrap the restitution fund was introduced in the state Assembly in February and a hearing has been scheduled April 9 by the Consumer Protection Committee. Asssemblyman Peter Frusetta (R-Tres Pinos) is sponsoring the measure. He contends that the fund places too heavy a regulatory and financial burden on the state’s mom-and-pop travel agencies.

The attorney general’s office, consumer groups and a coalition of travel trade groups oppose Frusetta’s bill as an attempt to gut the consumer protection law before it has had a chance to work. But all agree the fund must be scaled back to win the support of rank-and-file agents.

Deputy Atty. Gen. Christopher Ames says the state is intent on tracking down the deadbeats, who face late fees of up to $500 for missing the deadline.

In the meantime, Ames says, consumers should choose their travel agents carefully. The restitution fund doesn’t cover losses caused by out-of-state firms or unregistered California travel sellers. He advises Californians to purchase travel only from California operators who have registered and have a registration number posted in their ads and at their offices.

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“Ideally, we’d like the fund to be larger,” Ames said. “But this is being financed by travel sellers and there is an economic limit on what they can pay.”

Diane Embree, head of the travel restitution group, said the agency was prepared to begin billing the additional assessment in May but will hold off for a few months while travel lobbyists pursue emergency legislation to change the law.

ASTA’s Zukow hopes the proposed changes will result in regulations that will keep travelers feeling secure and prevent agents from going ballistic.

“We know this can work,” Zukow said. “Nobody said it would be easy, but we know we can get this resolved.”

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Steering Clear of Fraud

Here are some ways to avoid typical travel scams:

* Be extremely skeptical about mail and phone solicitations that say you’ve been selected to receive a fabulous vacation.

* Never give out a credit card number unless you initiate the transaction and are confident about the company with which you are doing business.

* Insist on complete details, in writing, about any trip before paying. These details should include the total price, cancellation and change penalties and specific information on all components of the package.

* Be wary of calling telephone numbers with a 900 prefix in response to a travel solicitation. The 900-number phone calls are billed to you and are a favorite scam of illicit operators.

* Walk away from high-pressure sales presentations that don’t allow you time to evaluate them or that require you to disclose your income.

* Be suspicious of companies that require you to wait at least 60 days to take your trip. Such companies may be moving from state to state to avoid prosecution or seeking to avoid the time limit imposed by credit card companies for disputed claims.

* Check to see if the travel agent you are dealing with is registered with the California attorney general’s office. He or she is required to make certain disclosures and meet state requirements for handling customers’ funds.

Source: American Society of Travel Agents

Researched by JANICE L. JONES / Los Angeles Times