June 10, 2020 / 2:12 PM / a month ago

Germany plans to hike consumer rights to protect against travel firm bankruptcies

Germany's Minister of Justice and Consumer Protection Christine Lambrecht looks on at the start of the weekly cabinet meeting at the Chancellery, following the outbreak of the coronavirus disease (COVID-19) in Berlin, Germany June 10, 2020. REUTERS/Fabrizio Bensch/Pool


BERLIN (Reuters) - The German government wants to beef up consumer protection rights for holidaymakers left exposed after bankruptcies of travel providers following the bruising experience with the costly insolvency of Thomas Cook[THOM.UL] travel group.

Chancellor Angela Merkel’s cabinet on Wednesday discussed a draft law by the ministry for justice and consumer protection that aims to set up an industry-wide fund financed by tour operators which can be tapped in case of a future bankruptcy.

“The Thomas Cook example has shown that the existing system of customer money protection carries the risk that travellers will not be compensated as required by the EU package travel directive,” Justice Minister Christine Lambrecht said.

At the time, insurance only covered a maximum of 100 million euros in reimbursement for all tour operators, but the damage was much higher. So the federal government stepped in to cover the damage totalling nearly 350 million euros.

“In the future, the money of consumers will be secured through a fund that is financed by contributions from tour operators,” Lambrecht said, adding this would ensure that travellers were fully protected in the future.

The government also wants the draft law to clarify who will pay for the transport of stranded travellers in case of an insolvency. In the event of bankruptcy, a guarantee provided by the tour operator should be drawn down first before other sources of funding are considered.

Consumer protection organisations as well as tour operators welcomed the government’s plan.

Reporting by Michael Nienaber; Editing by Edward Taylor

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