Amon Cohen presents a cautionary tale of when corporate cards go wrong – be afraid, be very afraid...
HALLOWE’EN WILL HAVE come and gone by the time the next edition of Buying Business Travel plops on to your doormat. Personally, I mark October 31 by switching off the lights and retreating beneath the bedclothes with an improving book and a torch until all those sugar-craving, juvenile trick-or-treat vampires have trailed off into the long night. However, to avoid being too Scrooge-like, if I may mix my festivals, let me share a horror story that has the twin virtues of being true as well as being missed by my esteemed colleagues in the corporate travel press during the summer.
It concerns one Linda Villis of Whitchurch, Cardiff, who worked for the fashion chain Peacocks. As someone who, it must be said, is not known for his interest in fashion, I must confess to ignorance of the very existence of Peacocks, but apparently it was a familiar presence on many high streets. Unfortunately, it went bust earlier this year and was placed into administration with debts of more than £700 million.
Ms Villis was the accommodation co-ordinator at Peacocks. A few months after the company went under, she opened her morning post to find a letter from the law firm Brachers, representing American Express. The letter informed Ms Villis that she was liable for Peacock’s outstanding Amex corporate card bill of £56,000 and ordered her to pay up in full immediately. “I couldn’t believe it when I opened the letter – I nearly fainted with shock,” the poor woman was reported as saying.
None of the travel had been undertaken by Ms Villis herself. Instead, she booked hotels on behalf of executives who did travel. So how did this nightmare happen to her? The answer is that, like many businesses, Peacocks deployed a single plastic corporate card to pay for much of its travel, effectively using the card as a centrally billed company account. However, because this was a plastic card, and not a lodge card, which may have been a more appropriate vehicle for this type of arrangement, it had both the company’s name and Ms Villis’s own name stamped on it.
Having those two names together was not merely symbolic. Whereas Visa and Mastercard cards generally carry corporate liability, Amex tends to favour what it calls joint and several liability (because, unlike the banks which issue Visa and Mastercard, it rarely has a treasury relationship with the client as well, in case you are wondering why).
Joint and several liability means that if the cardholder goes AWOL in Rio after a spending spree in a Rolex shop, the card company can pursue the employer for settlement of the debt. In rare cases, however, like this one, it works the other way round: if the employer goes bust, the issuer will go after the employee.
Luckily, this horror story had a happy ending. I spoke to Amex, which told me that once it established Ms Villis had not used the card for personal expenses or been reimbursed by her erstwhile employer, it called off the hounds. Instead, it has approached the receivers for settlement.
Amex has, therefore, behaved entirely correctly, but the case nevertheless shows up a potential flaw in joint and several liability. How can companies avoid the risk of putting travel bookers in this difficult situation? I spoke to HRG director of ancillary product, Brian Merry, virtually the only person on the planet who fully understands corporate cards. His recommendation? “If a card is going to be in someone’s name, check the liability,” he says.
Better still, consider other types of card, especially lodge accounts. Traditionally, lodge hasn’t been well-suited to handling hotel payments, but that is changing rapidly with the evolution of single-use virtual card numbers for every transaction. Incidentally, I believe that single-use card numbers will transform how companies pay for air tickets over the next couple of years, too. Watch this space...
TALKING OF PAYING for air tickets, I had long assumed that the phrase “taking the Mickey” derived from the, er, innovation-loving airline tycoon Michael O’Leary. However, surely even the Ryanair boss wouldn’t have had the chutzpah to introduce the latest “ancillary fee” unveiled recently by Wizz Air. The Hungarian carrier is piloting a scheme to charge passengers €10 for carry-on luggage larger than 42cmx32cmx25cm.
In a press release headed, with no hint of irony, “Wizz Air improves boarding experience”, Wizz claims its new rule is intended to improve on-time performance which has been hindered because “too many carry-on bags are brought into the cabin.” Strangely, it fails to mention that there are so many large carry-on bags because the same airline charges for checking luggage into the hold.
Since the route on which this scheme is being piloted – Luton-Katowice, Poland – is barely day-trip material, it requires travellers to pack an overnight bag of some sort, and that now effectively means no escaping a luggage fee on Wizz Air. It is when travellers feel they have no choice other than to cough up that they get annoyed. Let’s hope Wizz Air drops the idea – but in the US, Spirit Airlines and Allegiant already do something similar.
IT’S NOT ONLY AIRLINES which take the O’Leary – so do airports. I flew from Gatwick recently, and a few days beforehand the airport emailed me a “departure guide” advising me to check in two hours ahead of schedule for a domestic flight, three hours for a European flight or four hours for a long-haul departure.
Four hours? Who are they kidding? How many business travellers, or for that matter any travellers, have four hours to spare just to get through an airport? If that’s how long it takes to be in my seat ready for departure at Gatwick, I suggest we all boycott it until it makes its passenger processing considerably more efficient.
Alternatively, the guidance couldn’t be overkill designed to make us spend even more time milling around its highly lucrative airside shops and restaurants, could it? No, surely not.