The bankruptcy of travel agency Tellmeclub earlier this year has prompted the government to expand a program starting in April next year to reimburse people who paid money in advance to travel agencies that later go under.
That’s good news for customers who had lost most of the money they paid. Under the current program, only 1 percent of any money they had paid will be reimbursed. The planned expansion will allow refunds of about three times that amount in cases similar to the latest Tellmeclub case. That’s still far less than a full refund.
Travel agencies expressed concern that the expansion would place an undue burden on their business because of the greater contribution they need to make.
Since Tellmeclub filed for bankruptcy in March with debts of about ¥15.1 billion, the Japan Association of Travel Agents (JATA) has started the process of refunding 1 percent of the total amount customers have paid in advance. Reimbursement is expected to be completed by the end of the year at the earliest.
In the case of Tellmeclub, headed by 67-year-old Chikako Yamada, only ¥120 million is likely to be returned of the ¥9.9 billion collected in advance payments from between 80,000 and 90,000 customers across Japan.
In April, individuals affected by Tellmeclub’s bankruptcy created a group for those who had paid money to the company, and had considered filing a civil lawsuit to seek damages. But with the slim chances of actually getting their money back, the group is unlikely to sue, a member said, adding that legal costs will probably balloon should they file a lawsuit.
To prevent a recurrence, the Japan Tourism Agency has decided to expand the refund system under JATA from April next year, raising the contributions of travel agencies by 10 percent on average to brace for any potential bankruptcies by member companies.
Despite this and other steps to expand the refund plan, a future bankruptcy similar to that of Tellmeclub is likely to result in refunds of only around three times the current figure.
In light of the squeeze on corporate earnings, some firms are opposed to having their contributions raised.
A travel industry official expressed reservations about “increasing the burden of companies that have been doing business in good faith just because of this case.” The official called for a system that does not affect the operations of smaller firms.
Travel agencies and operators will also be required to submit their earnings reports to JTA once a year.
Tellmeclub’s failure eventually led to the arrest Wednesday of Yamada and a former employee of the failed Tokyo-based travel agency on suspicion of defrauding a bank of about ¥200 million in loans by window-dressing earnings data. The two were sent to prosecutors Thursday.
Investigative sources said that even after the firm fell into debt, Yamada received executive compensation exceeding ¥30 million a year.
According to a bankruptcy report, Tellmeclub’s liabilities already exceeded its assets in the year through September 2014, but in the earnings reports for the years through September 2015 and September 2016, Yamada was shown as being paid ¥33.6 million respectively in each of the two periods.