By Ben White, Director, ATC

Trust accounts started to become part of the ATOL consumer protection landscape in 2012 following a revision to the ATOL Regulations and the subsequent requirement for a class of ATOL holders, Accredited Bodies, to have trust accounts.

CAA Trust Account

A CAA Trust works based on a lengthy trust deed that sets out that all monies collected by the ATOL holder for ATOL licensable bookings under its ATOL need to be placed into a trust account within two business days of the consumer’s payment. The monies in the trust account are held by an independent trustee.

The monies can only be released from trust before performance (i.e. when the consumer’s holidays is fully performed) under certain scenarios set out in the trust deed.  For example, monies paid to suppliers for certain scheduled flights, and, in some circumstances, cruise payments can be reclaimed from the trust subject to the payment to that supplier being protected. That payment protection could either be in the form of insurance or in the case of payments made to airlines, it is possible that the payment to the airline could be protected by the chargeback scheme offered by corporate credit card schemes.

Payments from trusts are made via payment requests to the independent trustee. These could be made daily or less frequently depending on the ATOL holder’s business requirements.

In the event of the failure of the ATOL holder, the trust account becomes the property of the Air Travel Trust.

The number of trust accounts grew steadily over the following years, some businesses opting to have a trust on a voluntary basis. During the COVID pandemic, a number of businesses were unable to obtain security elsewhere and a trust account was not compatible with their business model, the CAA had to develop an alternative to trust accounts in the form of escrow arrangements.

CAA Escrow

During COVID it became apparent (to the CAA) that trust accounts only suited certain models and other options were also limited which is why the Escrow arrangement was introduced.

A CAA Escrow works differently from a trust account, instead of all consumer monies being paid into the account, only a percentage of the Consumer Funds are paid into the account. The level is generally 70%.

An escrow has an independent trustee and is still legally a trust account, but it provides greater flexibility to the CAA. Again, in the event of failure of the ATOL holder, the trust account becomes the property of the Air Travel Trust.

Escrow Reconciliation

On a weekly basis, the ATOL holder confirms:

• monies collected for new bookings taken.
• monies collected for existing bookings.
• the value of monies refunded to customers; and
• the value of bookings that were performed.

This would give a revised level of Consumer Funds and monies would either be paid into or claimed from the account.

Dormant or trigger trusts

In some circumstances, the CAA may require an ATOL holder to put into place a trigger escrow.  This works on the basis that it is fully set up with an independent trustee and the trust bank account is open, but there is no requirement to pay monies into the escrow unless a financial covenant is breached. This could be a cash floor or a cash to client monies ratio. If a breach occurs, monies would be paid into the escrow account until such time as the breach is cured.

More about Ben White

Ben worked at the CAA for nearly 27 years and during his time their Ben was responsible for setting up the Trust and Escrow Accounts, managing the relationships with independent trustees, drafting deeds in conjunction with external and internal legal advisers, banks and providing advice to ATOL holders and internally at the CAA.

How can the ATC help you?

ATC have an excellent record of helping their clients navigate ATOL licensing, ensuring that ATC’s clients get a fair deal with the CAA. With Ben’s leadership and unique experience, the ATC can help ATOL holders handle any new Trust and Escrow requirements.

Ben can be contacted at 01252 795 200 or admin@theatc.co.uk