LegCo Panel on Trade and Industry
REGULATORY REGIME FOR
OUTBOUND TRAVEL INDUSTRY
INTRODUCTION
This paper outlines the regulatory regime for the outbound travel industry.
REGULATORY REGIME
Legislative Framework
2. The existing regulatory regime of travel agents is aimed at minimizing the occurrence of fraud, and loss to travellers in the event of default of travel agents. The legislative provisions governing the operation of the outbound travel industry are set out in the Travel Agents Ordinance (TAO). The Ordinance provides -
- that any person carrying on business as an outbound travel agent must obtain a Travel Agents Licence from the Registrar of Travel Agents (RTA);
- that as a condition of the licence, a travel agent must be, and remain to be, a member of an approved organization, which is the Travel Industry Council of Hong Kong (TIC), thus subjecting it to regulation by the TIC;
- for the establishment of an Advisory Committee on Travel Agents (ACTA); and
- for the establishment of a Travel Industry Compensation Fund (TICF).
3. The regulatory structure is therefore made up of two components - the RTA and the TIC. In addition, the ACTA provides advice on the regulatory regime, while the TICF provides a buffer to compensate travellers against default of travel agents. The details are set out below.
Regulatory Functions of the RTA
4.The RTA is responsible for the licensing of outbound travel agents. This licensing requirement provides the first line of protection for consumers against default of outbound travel agents. It aims to enable the public to identify bona fide travel agents. Operation of an outbound travel agent without a licence is unlawful. In addition, the RTA arranges character checks of persons in control of a travel agent (directors, shareholders, proprietors, partners, and senior staff) before the first issue of a travel agent licence, and when there are changes in such personnel. These checks help prevent undesirable characters from operating as travel agents. He also conducts financial surveillance on licensed travel agents, and imposes licensing conditions in that regard if necessary. The RTA is, in addition, empowered to investigate into cases where travel agents are suspected to operate against the public interest, including possible defaults. The RTA also hears appeals against the refusal of TIC membership.
Regulatory Functions of the TIC
5. The TIC is a self-regulatory body of the travel industry. Its position is recognized in the Travel Agents Ordinance which provides that a condition of a travel agent licence is that the licensee should be and remain a member of an approved organization (which is the TIC) during the period that the licence is in force. TIC membership carries conditions, such as minimum requirements for capital, number and experience of staff, and office premises. Four of the 22 members of the board of directors of the TIC are non-industry members appointed by the Financial Secretary. Amendments to important provisions in the TIC's Memorandum and Articles of Association also require the approval of the Financial Secretary. The TIC sets and enforces codes of conduct and rules to regulate business operations in such areas as advertising, business practices, etc.
6. The TIC collects levies on behalf of the TICF Management Board. As such it monitors levy loading by travel agents and reports irregularities to the RTA for investigation, jointly if necessary.
7. Through its complaint mechanism, the TIC helps resolve disputes between travellers and travel agents. Where a complaint against travel agent malpractice is substantiated, the TIC may impose penalties on the travel agent. In case of complaints about service quality, the TIC may try to arbitrate or, if not successful, decide on settlement. The decision of the TIC is binding on the travel agent but not on the complainant, who may seek other forms of redress if dissatisfied with the decision.
Co-operation between the RTA and the TIC
8. There is close and regular liaison and cooperation between the RTA and the TIC in respect of, for example, the surveillance of travel agents and investigation into cases involving travel agents or travellers.
Advisory Committee on Travel Agents
9. The ACTA advises the Chief Executive on matters relating to the administration of the TAO, the carrying on of business of a travel agent, and any matters it considers to be in the interest of travel agents and persons using outbound travel services. It is chaired by a non-official independent of the travel industry. Its non-official members are drawn from various fields such as consumer interest advocates, the banking, accounting, and legal professions and the travel and tourism industries. Official members include an officer of the Trade and Industry Bureau and the RTA.
Travel Industry Compensation Fund
10. The TICF provides ex-gratia compensation of up to 90% of the loss of package tour fares in the event of travel agent default. It is funded from a 0.15% levy on package tours as well as incomes from bank interests and investments. Since its establishment in 1993, a total of $5.2 million has been paid out. As at the end of April 1999, there was a balance of some $282 million in the TICF.
ADVICE
11. Members are invited to note this paper.
Trade and Industry Bureau
May 1999
Ref : L/M (33) to TAR 2/2091/78 A II
