Our client’s travel agency business specialised in selling flights online, mainly to Pakistan and other destinations in Asia.
After launching, the firm traded from serviced offices in London, where it sought to attract customers via the website, which were then transferred to an outsourced call centre in Pakistan. Should customers wish to purchase a flight, they would be sent a booking form to complete and a deposit would be taken from either a credit or debit card.
Commission
The company would then buy the tickets from an unconnected retail supplier, which would be issued to the customer. Earnings were derived from commission payments that were made on the transaction. Because the company operated on a basis known as ‘retail to retail’ it was not required to be licensed by the regulators, ATOL or ABTA. Trading was relatively successful and the company achieved a turnover of just under £1.3 million at its peak. However, more challenging economic conditions resulted in falling sales and competition from rivals who were chasing volume business and cutting their prices.
Frozen Bank Account
The company’s bank, Barclays, suspended activity on the bank account for several days because there were complaints from customers that refunds had not been paid after flight changes or cancellations.
The director’s response was that these customers were not eligible for refunds because they had not read the company’s terms and conditions. The bank accepted this explanation and allowed the account to reopen. But, this was only for a brief period, as the account was again temporarily frozen for two weeks because it was found that the company was neither paying for tickets, nor providing refunds that customers were entitled to.
The firm’s problems continued. Cashflow dried up, and customer complaints grew. To circumvent the frozen bank account issue, the company started using another account that belonged to a connected business but had not previously traded.
Trading Standards visit
However, this did little to solve matters, as consumer confidence had been severely damaged, and negative publicity on social media resulted. The company failed to resolve complaints within adequate timeframes, and staff from Trading Standards made an official visit as a result of the complaints.
Trading Standards took the company’s computer and various files away for investigation and insisted that the complaints needed to be sorted out as soon as possible. It said a report would also be prepared on the findings.
To date, Trading Standards has taken no further action, but due to severe reputational damage, falling sales, and an inability to purchase tickets on behalf of customers who had already paid, the company could no longer operate.
