On July 1, the updated version of ARC’s Agent Reporting Agreement (ARA), the first major overhaul since the 1980s, goes into effect.
Agencies covered under the present ARA will automatically be transitioned to the new agreement. But they will see a few immediate changes.
First is the reduction of the sales report draft and credit window. That has been reduced from 10 days to five days. That’s good news for the 55% of agencies who get a credit from ARC, but it means that agencies that have a lot of cash sales now have five days to make those payments instead of 10.
The draft/credit window will move from a Wednesday, 10 days after a period ending date, to a Friday, five days after a period ending date.
This means that during the transition to the new ARA, there will be two draft/credit days in one week, July 10 and 12.
ARC owes more agents because many agents use its service fee program, said Lauri Reishus, ARC’s vice president and COO.
Additionally, ARC will no longer require agencies to file their weekly ARC report if they have zero ARC sales. That had been a source of problems in the past, with agents getting hit with a late-reporting fee if they failed to file a zero sales report. ARC would waive this fee for many agents the first time, Reishus said. ARC decided that not requiring agents to file when they have no ARC sales was one less thing to worry about.
“Now ARC doesn’t have to send a nastygram saying that they failed to submit a report,” said John Pittman, vice president of industry and consumer affairs for ASTA, which gave ARC input on the new ARA. “Everybody wins with this change.”
ARC has also reduced the number of circumstances that can trigger additional operating requirements, Pittman said. This includes a bounced check or dishonored draft and late sales reports. When ARC gets a returned draft, the agreement provides that it will contact agencies and give them until the next business day to remedy the problem.
Another change that all agencies will see is a new “reaffirmation” requirement. ARC will begin to implement this in the fourth quarter. Agents will be notified of their affirmation based on their anniversary date with ARC. It’s a way for ARC to make sure it has up-to-date information for agency contact information and ownership. Reishus said that there have been instances when agencies had moved or been sold and ARC never knew about it.
Agents will get an email based on their ARC anniversary and have a few months to reaffirm information about their agency, said Jeannine Hankinson, ARC’s managing director, client services.
However, industry lawyer Mark Pestronk said that agencies whose ownership has changed need to get that approved before the certification deadline.
ARC is instituting two other major changes in the way it operates that are part of its standard operating processes but not actually covered in the ARA. One is that agencies can keep their ARC numbers if the agencies move across state lines. This took some persuading, said Pittman, since the first two digits of ARC numbers indicate the state in which the agency resides.
Reishus said this change was a result of agency input. “I would say that that was the most demanded request,” she said.
The second change that is outside of the ARA is that agencies can now have multiple ARC numbers at a single location. Many corporate agencies have separate ARC numbers for corporate clients and until now had to maintain separate suites with their own addresses to conform to ARC rules.
That made sense in the days of paper ticket stock, when airlines wanted to avoid co-mingling of tickets and did not want multiple printers in one room, said Pittman. Such precautions are unnecessary in the days of e-tickets. ARC had instituted this for corporate agencies, calling it the Centralized Service Location. Seeing the low level of risk involved, it opened that up to the agency community as a whole.
These two changes are ARC processes designed to support the ARA, Reishus said.
The new ARA also includes a new “Associate Branch Location,” which enables agencies to add branch offices that are not wholly owned. This is something that is probably of more interest to larger agencies that want to have partially owned branches under their ARC number, said Pittman. This was another ARC response to agent input, Reishus said, adding that there are many businesses in the U.S. that have shared ownership.
The new agreement also eliminates the requirement that agencies’ Management Qualifier and ARC Specialist Qualifier be based at the same home office. In addition, ARC has dropped the requirement that Management Qualifier have two years of industry experience.
ARC kept the financial guarantee as is; agencies continue to have the option of posting a bond, letter of credit or cash deposit and the amounts for agents have not changed, Pittman said. Requirements for the new Associate Branch Location are higher. That’s because as a new model, the risk involved is an unknown. ARC will evaluate risk management for this category over the next few years, Reishus said.
The new agreement also acknowledges that ARC sells agency data. Reishus said that ARC does this with strict adherence to data privacy laws.
“We feel confident that we are doing things that are lawful and appropriate, and we wanted to call that out in the spirit of transparency,” she said.
Travel agents soon will receive a mailing from Kathi O’Neill, ARC’s vice president and general counsel, with more information and contacts regarding questions about the updated ARA.
Pittman praised the way ARC discussed ARA changes with the industry. He said that ARC had several meetings with ASTA in 2012 about the new agreement.
“They’re showing that they’re listening and paying attention to agency subscribers,” he said.