Darren – I love it how you can be 100% right – but also wrong at the same time.

Taking credit card payments is a massive challenge for small travel companies already. [UK]. One solution is to join a trust association (in the UK) such as the Travel Trust Association. Or take insurance from someone like TOPP (but they are not currently taking on new members – Jan 2009)

Alternatives are PayPal (which quite a few small companies use already) – but that is quite a high charge (fee wise) so puts some companies off.

BUT – and this is where you have gone slightly wrong – just because a small company can’t take card payments – this doesn’t make them immediately go into administration. They will just change business model and charge on checkout (like small hotels do). Credit card companies don’t mind that because the product has already been delivered – and it is a cardholder present transaction. Completely changes the risk profile.

So yes – you are absolutely right that taking credit card payments is a challenge for small travel companies. But the outcome isn’t going into administration, but changing how companies take payments.

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Well from my own experience credit card companies generally protect themselves as much as they can against this type of thing. They can ask businesses for a type of depsit up front or they defer payment, for example customer A, books on the 01/01/09 but the credit card company holds on to the money until the 01/02/09, this gives the credit card company a months worth of funds to protect themselves against failure, and of course they charge for the use of their services.
Of course we already have the Travel Trust Association but why stop at a trust for hotels, what about car hire? or attraction tickets?

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Darren, you are right – but the risk that the credit card companies are evaluating is the company risk – not the consumer one. The “problem” with travel is the time period between charging the card and delivering the service. Credit card companies will give cardholder present card systems to anyone really – if the service has been delivered prior to the card being charged as that is a very different scenario.

If you talk to trading standards its a very different scenario not getting a service (between paying for it, and the service being delivered, perhaps because the company goes bust) – and getting a service – that suffered from delivery issues. In the first situation the card company may repay – but in the second – the discussions can be endless (with physical goods – you either have something or you don’t – with travel you can get partial delivery – like a flight – but a flight a week later…..)

I am glad you brought this subject to consumer attention. Interested to see where it goes from here!

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Correct, Darren. It does not take a lot to work out that credit card comp’s are fed up with being the de facto bonding agency for start ups, smaller tarvel outfits etc. Even big ones. Let’s face it, if you were Visa would you not have taken payments from/ with Intasun or Court Line, Exchange Travel or Xcel?

We do not actually hear the view of credit card comp’s (CCC’s) on this subject, but I am sure it is a hot topic in a boardroom somewhere. The thing is, what can they do about it? Well, events such as the ones mentioned are mercifully rare and a number of smaller outfits going belly up, CCC’s can probably wash under the carpet.

There is a mixed message; whereas a (big) travel company going belly up can cause a substantial loss, holiday sales are generally big ticket items (for many famillies, the biggest) so a CCO would be silly not to entertain using cards in the travel industry, I can only guess that, from the lack of response and lack of sabre rattling from CCO’s that they are, on balance, still coming out on top…

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If any company has insight into a company’s credit situation you’d imagine it would be a cc company. Thinking as a biz owner, if I knew there was a risk of one of my clients going out of business I’d make sure they were paying the highest fees possible. Those extra fees cover the extra insurance I need to cover my extra liability in countries where I’m liable-not all! If the company can’t handle the fees let them be my competitors problem (too few companies think like this!).

To be honest I really don’t think this could ever be an issue as it’s all sub-insured off to others. Every biz just adjusts it’s pricing to the challenges they encounter. Those that can’t, don’t survive. The consumer always ends up with the bill, either in higher prices or bigger government spends (paid for by tax payers).

FYI, in cases of double bookings the credit card company just takes the money from the merchant so only the merchant loses (and rightfully so). That’s why the good ones just happily refund.

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Darren

If companies have there credit card facility removed it means they can no longer take payment. If you can not earn money of course the only thing left is administration.

As to credit card companies stopping protection, in the UK you would have to change the law and the government has already stated that is just not going to happen. What you may see is an increase in fees as credit cards try to cover the risk.

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The other factor that card companies play with is the money transfer period. For example you can get into a situation where you only receive (as a company) money from a card transaction 6 weeks after the transaction has taken place (depending upon your risk profile).

If, as a travel company, you have had to pay suppliers PRIOR to receiving the money – then you are in trouble, unless you have good cash reserves to fund your cashflow.

So its not about removing a credit card facility – but about making the charges and payment periods unworkable for a travel company.

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Hi Darren

If i am right, you are referring to customers being covered under Section 75 of the Consumer Credit Act 1974. This is where basicly, credit card companies will refund customers if they have a claim against suppliers for breach of contact. So, if your holiday is cancelled, or someone goes bust, they will pay up, if the purchase (per transaction, no per item) was between £100 and £30,000.

This is law. The credit card companies cannot just simply stop paying out, as they have to comply with the Consumer Credit Act. So, until the day comes (if it comes) that this law changes, consumers are protected, financially, if they pay by credit card.

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Another trade body to join…… Forgive me, but I cannot help thinking that things were sooooo much easier before, when we had stabiliser. Before the EU, Her Majesty’s Grateful Government, Uncle Tom Cobbly and his mates all stuck their oar in to try and improve things, it was simple. An agent (any agent) had to join ABTA as did all the providors of holidays, an ABTA agent could only sell ABTA tour operators and vica versa and the whole thing was bonded from head to foot. High Court sez, no, that’s against competition or Section 44 (a), sub para 28 vii of the 1992 EU Regulations for the Importation of Statutory Widgets or something. Now, everyone has to be member of this and be regulated by that, join the FSA to sell travel insurance (tschoch!) have an ATOL because someone wanted a car hire with their flight (under certain conditions) Jo Public hasn’t got a kalooney as to what covers what – so Hey! Yes! Why not! let’s have (yet another) outfit to cover hotel sales…. … Please forgive me if I am just getting a tad exasperated! … especially when what the industry really needs, is for someone to bond scheduled airlines…. as the saying goes, money talks, merit walks…

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I don’t want to temp fate… and obviously i could be wrong… but i doubt very much that credit card companies would withdraw their service. This would surely be like slitting their own throats?

Credit card companies need people like you and i to pay for things on our credit cards for them to survive. It just happens that “section 75″ is a condition laid down in law that thery have to abide by.

Although the amount of people they have had to refund as a result of this law has probably gone up this year, in the grand scheme of things, it’s a tiny proportion of the number of people that actually use their cards.

How many people do you know that have actually taken advantage of this law?

Credit Card companies withdrawing their service would be like a bank calling in all it’s morgages at once… I suppose it is possible, but incredibly doubtful.

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I don’t think the impact will be as dramatic as you think. It will positively take a toll on small businesses in form slightly higher rates to processing outfits like Paypal, Googlecheckout and Moneybookers.

Our biggest problem is that 2checkout.com, one of our credit card processors, charges an exorbitant amount (which we have to pay because it’s still the cheapest rate given our low volumes) to process our transactions, yet they refuse to pay out many of the transactions because of their ridiculously stringent fraud protection scheme.

Long term, it looks like we will have to depend on Paypal, Googlecheckout or Moneybookers to keep things reliable and stable until we are worthy of signing a deal with a processor that gives us discounts on the volumes we process. I have a feeling that this is the disadvantage that most small outfits will have to live with for the foreseeable future.

Unless the open source community (like the one supporting oscommerce) will develop
the sophisticated back ends to payment gateways that small businesses cannot develop independently. But, that’s a big if.
Payam

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Darren

Trust accounts, under UK law can be set up by any company. If you asking for someone trustworthy to regulate that we already have the TTA. Who would accept membership (and already have) from accommodation providers.

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Interesting topic in this tight times.

I can’t see the government allowing the credit card companies to consider changing the law. The may wriggle and fight, but they will only find another way to cover themselves by charging us more, one way or another, for using the credit.

So I expect, the credit card companies are going to charge more for travel companies for the facility, and customer will end up paying more.

When people are keen to use their credit cards, because of section75, they should check out before booking, and read the terms and payments charges with the company they are booking with.

I am sure credit card fees on holiday purchases will get higher. Some Travel Companies and airlines, have been charging between of 2% and 2.5%, for credit card balance payments, for some years already.

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i think there needs to be vetting process system by the governments of the developed nations on all countries. I have perpetually traveled for over 10 years and I have only used my credit card maybe 10 times to reserve a room and only on HostelWorld.com.

First problem, if you reserved a room with a credit card the price of room is double to 10 time more expensive minimum.

Second, I do not trust the Hotels.

I have a site called HoboHideOut.com and we are going to extensive vetting the hotel, owner, staff, then allow the visitor to pay the hotels directly though paypal and only for one day, so the loss of money is greatly minimized.

People who lose money on credit card transactions do not tell anyone, they are ashamed, this problem is a lot bigger than people know or believe.

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To answer the question posed by the headline, the answer is no they couldn’t. They might want to but they can’t.

It’s not up to the banks or credit card companies to “put their foot down”. The consumer protection offered by a credit card is mandated by law and it cannot change without the approval of parliament. It doesn’t stop the credit card companies from making life difficult for the consumer and being slow to cough up the money, but they can’t actually take those rights away.

Also, credit card operators don’t pass the money on to the merchant immediately (unlike a debit card where the transaction is instant). It’s usually collected once a month, so in some cases it can be almost two months until the merchant sees the money – plenty of time in most cases for the bank to put a stop on the payment if there’s an allegation of fraud.

Darren, I have told you this before and you seem not to believe me. My fiance works in software in a bank and knows a lot about compliance issues. I’m not making this stuff up.

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PS My fiance adds that banks/ CC companies do risk assessments on the merchants and tend to hold on to the money longer before transferring it to the merchant if the risk of administration is deemed higher than acceptable. At the end of the day though it’s in CC companies’ interest for consumers to continue using credit cards since they make money from it. Consumer protection is part of that, so even without the legal protection that they are forced to give, it’s unlikely they would wholly fob off the risk to consumers.

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