In this post, we’ll cover what it takes to become a travel agent. Here’s everything you need to know about travel agency license requirements.
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Who Needs a Travel Agent License?
Technically, travel agents aren’t licensed, they’re registered, and only four states impose that requirement: California, Florida, Hawaii, and Washington. These are the only states that have what are called “Seller of Travel” (SOT) laws.
If you plan to operate as a travel agent in any of these “SOT states,” you will need to comply with the state’s travel agency registration requirements in addition to its regular business registration requirements. That is true whether you maintain an office in the state or simply offer travel services to residents of the state. There are only a few exceptions to this rule.
What Are the Steps in the Registration Process?
The registration process varies depending on the state, but there are certain common elements. There is, of course, an application to be completed and submitted, along with the appropriate application and registration fees.
But the biggest concern of SOT states is maintaining the integrity and reputation of their travel industry and promoting tourism. Specifically, consumers must be confident that the money they give to a travel agency is turned over to the airline, hotel, cruise line, or other business that will be providing them with travel services.
To ensure that payments from travel agency clients are remitted properly, a mandatory step in the registration process is to establish a trust account or provide a surety bond to secure direct payments from clients.
There must be an active travel agency bond in force at all times to prevent suspension or revocation of the agency’s registration as a seller of travel in that state. The required bond amount varies by state and may depend on the specific travel services offered and the agency’s sales volume. This amount, also known as the bond’s “penal sum,” is the maximum amount that will be paid out on a single claim.
Why is a Travel Agency Bond Required?
A travel agency bond is a type of license bond that serves as a travel agent’s guarantee to abide by the state’ laws governing the operations of travel agencies. It specifically guarantees that the travel agency will handle clients’ deposits and payments properly and turn those funds over to the companies to which they are owed. Any violation of the terms of the surety bond agreement that causes a financial loss can result in a claim being filed against the bond by an injured party seeking restitution.
How Are Travel Agency Bond Claims Paid?
The surety bond agreement or a travel agency bond is a legally binding contract that involves three parties. The state licensing/registration authority requiring the bond is the “obligee,” the travel agency is the “principal,” and the company authorizing the bond is the “surety.”
The surety bond agreement makes the principal entirely responsible for paying valid claims, but in practice, things aren’t quite that straightforward. Unless the principal is able to pay a claim right away, the surety steps in and pays it on the principal’s behalf and is then reimbursed by the principal. In essence, the surety is lending money to the principal who must then repay that debt.
How Much Does a Travel Agency Bond Cost?
In setting the premium rate for a travel agency bond, the surety’s main concern is the risk that paying claims on behalf of the principal entails. The best predictor of that risk is the principal’s personal credit score. The better the credit score, the lower the premium rate, and vice versa. Someone with excellent credit may pay a premium as low as 1% of the bond’s penal sum.
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