ATOL Escrow Trust

 

 

Overview

The CAA’s Air Travel Organiser’s Licence (ATOL) scheme protects the public from losing money or being stranded abroad because the travel provider that they have booked to travel with fails.

The CAA have continued to focus on ensuring appropriate protection of advance customer monies and requiring ATOL holders to maintain adequate liquidity to meet future obligations.

The recent ATOL reform consultation issued by the CAA, introduced the option of using escrow accounts for ATOL holders, as a means of providing financial security.

There are similarities between an ATOL escrow account and an ATOL trust account they both share many of the same characteristics as a Trust Account (https://pttrustees.com/atol-trust/).

An escrow arrangement is designed to protect a set and/or variable percentage of consumer funds collected, and the amount is reconciled on a weekly basis.

However, there are several important differences in the way they operate particularly in the following key areas:

 

1. Agreed Protected Funds

  • The ATOL Holder is required to place a percentage of Consumer Funds into Trust – the Agreed Protected Funds
  • The percentage is specified by the CAA but is typically 70%
  • The quantum of Agreed Protected Funds is based on a calculation of Cash to ATOL Client monies

2. Payment into Trust

  • Funds for licensable transactions are collected by ATOL Holder as normal
  • Once per week (or fortnightly is some cases), ATOL Holder has to top up the balance in the Trust Account to equal the Agreed Protected Funds for that reporting period
  • If the Agreed Protected Funds on a Relevant Compliance Reporting Day is a figure greater than the total amount standing to the credit of the Trustee Account on that Relevant Compliance Reporting Day, the ATOL Holder shall within one Business Day of the date of the relevant Compliance Certificate pay the funds into the Trustee Account such that the balance of the Trustee Account equals at least the Agreed Protected Funds recorded in the relevant Compliance Certificate.

3. Claims from the Trust account

  • If the Agreed Protected Funds on a Relevant Compliance Reporting Day is a figure less than the total amount standing to the credit of the Trustee Account on that Relevant Compliance Reporting Day, the ATOL Holder may submit a Payment Request for the amount in excess
  • The Payment Amount should not leave the amount standing to the credit of the Trustee Account below either the Agreed Protected Funds and/or the Minimum Applicable Protected Funds, whichever is the higher amount
  • Trustees are not required to perform detailed testing before release of funds and thus rely on controls around the process of preparing the of Cash to ATOL Client monies ratio

4. Supplier Payments

  • Escrow Funds are based on a calculation of Cash to Client monies and only a percentage of the gross consumer funds are sent into the Escrow Trust - early release of funds to pay flight monies are not permitted

Reporting: ATOL Holder to Air Travel Trustees (ATT)

  • ATOL Holder is required to submit a Compliance Certificate to the ATT on a weekly/fortnightly basisName of the element

  • The Compliance Certificate is to report the following figures:

    • £[ ] was standing to the credit of the Trustee Account on the Prior Compliance Reporting Day;
    • £[ ] has been paid into the Trustee Account since the Prior Compliance Reporting Day [(or, in the case of the first such certificate, since the Commencement Date)];
    • £[ ] has been paid by the Trustee in response to Payment Requests since the Prior Compliance Reporting Day [(or, in the case of the first such certificate, since the Commencement Date)];
    • £[ ] in total stands to the credit of the Trustee Account;
    • the Agreed Protected Funds is an amount equal to £[  ], which has been calculated as follows and is [less than/greater than/equal to] the total standing to the credit of the Trustee Account.

  • If the Agreed Protected Funds is less than the total amount standing to the credit of the Trustee Account (see Claims from the Trust account), the ATOL Holder will need to submit a Payment Request for the excess of funds along with the Compliance Certificate

Reporting: PTT to ATT

Trustees are required to report to the ATT as per below:

  • Weekly/Fortnightly

Statement setting out:

  1. all amounts that have been paid into the Trustee Account since the Prior Compliance Reporting Day (or, in the case of the first such statement, since the Commencement Date); and
  2. all amounts that have been paid out by the Trustee in response to Payment Requests since the Prior Compliance Reporting Day (or, in the case of the first such statement, since the Commencement Date).

The statement will show figures for the previous Compliance Reporting period

  • Monthly

Statement setting out:

  1. The opening balance on the Trustee Account
  2. The total Consumer receipts into the Trustee Account during the month
  3. The total payments made from the Trustee Account during the month
  4. The closing balance of the Trustee Account

Conclusion:

Given the impact that COVID has had on the travel industry, Escrow Trust Accounts may benefit ATOL Holders that use advance funds to pay airlines before the consumer has enjoyed the holiday.

Escrow accounts maintain the direction of ATOL Trusts in strengthening the UK travel industry by protecting both consumers and travel businesses.

PTT has already onboarded a growing number of Escrow ATOL Holders and is well equipped both in resources and technology to manage these Escrow Accounts in a robust and supportive manner both in protecting consumer funds in accordance with the Deed and providing support to the Travel business.

" In the event of any bank default, we accept no liability but will assist clients to recover compensation from any applicable financial protection scheme."