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ABTA is to backtrack on its refusal to pay out on accommodation-only claims following the collapse of former president John Harding's company Travelscene.

Newman Street initially claimed it was not liable for payouts on Citybedz and Austro Tours, both of which emerged as unbonded subsidiaries of Travelscene after the group collapsed on August 19. Neither brand was in ABTA membership.

However in a dramatic u-turn, ABTA has said it will pay to agents who booked through the accommodation-only brands believing in "good faith" they were covered by ABTA protection.

"We have made this decision because agents booked in good faith believing they were ABTA-bonded," said a spokeswoman.

It has not yet emerged the value of Citybedz and Austrotours payouts, but estimates put Travelscene Group as owing £1.5million. Around 25% of its total business is believed to be accommodation-only.

Harding, Travelscene sales director, has maintained he was forced to compete with other non-bonded suppliers in the market.

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