By: Tom Ogg
Let’s review some information on Travel Like a Travel Agent Scams. For decades now, travel scammers have robbed people of their hard-earned money with outrageous claims and until they are either shut down, or go bankrupt. It has been and sadly continues to be a problem the travel industry faces.
When World Class Travel Network (a huge card mill) was shut down by the FTC years ago, everyone thought that the card mill invasion was over. Unfortunately, the FTC’s settlement negotiations with WCTN seemed to validate the business of operating a card mill and defined how one could do so within the confines of the settlement.
I thought it might be beneficial to document the elements of scams in the travel industry by what to look for and how to protect one’s self from being suckered in.
Scams only work when they seem so outrageous that they defy logic and therefore, might be true. Anything that falls within the bounds of common sense simply won’t work. As an example, rather than say “we are so big we have several groups booked with XYZ cruise lines” a scammer might say “we are so big we are thinking about buying XYZ cruise lines.” Here are the various types of scams that are common in the travel industry
Travel Like a Travel Agent Scam. This one needs little introduction. This old scam is being used in our industry with great success because consumers really want to believe that they can get free and discounted travel by pretending to be a travel agent. Throw in a pyramid recruiting scheme and voila you have the elements great scams are made of. “You can make hundreds of thousands of dollars while traveling the world for free” is the mantra.
These kinds of scam bilk a consumer out of hundreds of dollars thinking that they will receive a “travel agent ID card” and able to access travel agent special rates for much less than a consumer would pay. Greed fuels this scam and sellers of travel agent ID cards can make hundreds of thousands of dollars while the buyers of the cards are usually quite disillusioned.
Here is how to avoid being victimized: The second you hear the words “recruitment”, “travel agent ID card” or “travel agent discounts” run the other way.
The Paradigm Scam: Companies claiming to have discovered a new paradigm in travel distribution usually have found a new way to victimize consumers into believing that they are getting in on something revolutionary. The current glut of “on-line travel agents” that buy an affiliate website, get a travel agent ID card and are paid for what little business is actually booked on the website (usually their own) are a prime example of this kind of scam. Again, these scams generally have heavy recruiting programs and rely on the cash flow of new recruits and monthly “website maintenance fees”. In a lawsuit against YTB, as an example, the state of California noted that “According to company records there were over 200,000 members in 2007 who typically pay more than $1,000 per year–$449.95 to set up an “online travel agency” with a monthly fee of $49.95. In 2007, only 38 percent of the company’s members made any travel commissions. For the minority of members who made any travel commission in 2007, the median income was $39.00–less than one month’s cost to keep the Website. There are at least 139,000 of the company’s travel Websites, all virtually identical, on the Internet.”
Here is how to avoid being victimized: Don’t ever believe a recruiter who is making money signing you up. Demand to see financial statements documenting average earnings for each member.
Franchise Scams: Our industry is littered with failed franchise companies. All companies offering franchise opportunities within the United States must do so by presenting a FDD, or Franchise Disclosure Document. This document offers potential franchisees complete information and disclosure. If you are being approached with a UFOC (Uniform Franchise Offering Circular) it is quite likely that the company is not registered to sell franchises within the United States at this time.
If you are considering a franchise opportunity make sure that the company is offering a registered franchise opportunity and is also complying with all state laws.
Here is how to avoid being victimized: Never consider verbal representations of the franchise recruiter to be relevant to the Franchise Disclosure Document. The FDD is the only agreement between you and the company offering the franchise. Have your accountant validate commission margin claims by using the financial statements in the FDD.
Never execute a franchise agreement without the advice of a competent travel attorney familiar with business opportunity and franchise law. While there are several in our industry, one that comes to mind as being especially capable is the firm (www.TravelLaw.com).
While there are many other prevalent scams in our industry, these are the most important ones. Care should always be taken to make sure that your hard earned investment is made with a company that has the capacity to deliver everything they are promising.