The Consumers Association of Singapore (Case) is pushing for travel agencies to take out insurance in the event of sudden closure so that customers are not left in the lurch.
The move comes after Five Stars Tours folded out of the blue early last month, leaving at least 3,000 customers high and dry.
While the consumer watchdog is unable to share exact details of how the scheme will work as discussions are still in the preliminary stages, it could be similar to its Spa and Wellness accreditation programme, said Case executive director Seah Seng Choon.
The scheme, introduced in 2010, makes it compulsory for spas accredited by Case to insure customers. If a spa shuts down for at least 30 days, customers will be compensated for any unused portion of their prepaid packages.
Case hopes to first roll the new scheme out to its 16 CaseTrust accredited travel agencies before extending it to the rest of the industry with the help of the Singapore Tourism Board (STB). As of December last year, there were 1,154 licensed travel agencies here.
If Case succeeds, the travel industry would not be the first to have an industry-wide insurance scheme to protect consumers should a business shut down without warning.
The Council for Private Education has a similar programme to protect students who have paid up fees in the event that a private school folds.
Mr Seah raised concerns about travel agencies collecting cash upfront for tours that would be conducted months later, pointing out that there have been major closures in the past. "(The practice) is a time bomb, especially when so much cash is parked upfront with the travel agencies, which have different degrees of financial strength."
While Five Stars Tours was the first CaseTrust travel agency to close down, there have been other sudden closures by non-accredited agencies in the past, such as Ken-Air in 2002 and Ananda Travel in 2006. The issue is more urgent now as more travel fairs are being organised, with huge amounts of cash changing hands, said Mr Seah.
STB, which has been in talks with Case and other industry stakeholders, said it will study the pre-payment protection scheme "more carefully as there are wider implications to be considered".
The board's director of travel agents and tourist guides, Ms Ong Ling Lee, said collecting cash upfront is a normal commercial practice and is dependent on individual business needs.
"Currently, the regulatory framework for travel agents ensures that travel agents do not engage in malpractice," she said.
"This includes the prohibition against the fraudulent use of a client's monies held in trust."
There are also procedures that travel agents must adhere to should there be changes to a booking, she added.
Chan Brothers Travel marketing communications manager Jane Chang said there is room for more measures to protect consumers. For instance, STB could perform an audit to check the financial health of an agency before renewing its licence, she suggested.
Ms Alicia Seah, director of marketing communications at Dynasty Travel, said Case's scheme may not address the root of the problem - a lack of proper auditing of what some travel agencies do with the money they collect upfront.
"The insurance premium will mean additional costs that will be borne by either the customer or travel agency, which I don't think is fair."