Fyre Festival disaster: How to avoid fraud when booking your vacation

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When it comes to travel fiascos, few rival the 2017 Fyre Festival. Thousands of people bought tickets—some purchasing package deals for up to $12,000 — for a luxury music festival over two weekends in the Bahamas.

“The first thing we see is people running for tents and fighting over tents,” she told CNBC’s “American Greed.” “People spent $10,000 to go to this thing. How could they not have anything set up? This is not what I signed up for.”

The festival itself was abruptly canceled when its headliners backed out. Local contractors in the Bahamas, investors and employees were unpaid. And thousands of stranded festivalgoers were left scrambling for flights home.

The Fyre Festival’s creator, 27-year-old serial fraudster Billy McFarland, is serving a 6-year prison sentence after pleading guilty last year to multiple fraud counts. A federal judge ordered him to forfeit more than $26 million. But because McFarland spent all the money he took in, his investors, employees and ticketholders will never be made whole.

As outrageous as the Fyre Festival fraud was, it holds some lessons for all travelers, according to Charlie Leocha, president and co-founder of Travelers United, a Washington-based nonprofit that advocates for the traveling public.

“We’re really sort of faced with a problem of ‘buyer beware,'” he told “American Greed.” “You’ve got to check out and make sure that you’ve got a legitimate operator.”

In the case of tours, try to book with a member of the United States Tour Operators Association. Established in 1972, the group requires its members to post a $1 million bond to protect customers if something goes awry. Be sure to verify your tour operator’s membership using the organization’s online directory.

Leocha also suggests using a travel agent. They may seem like anachronisms in this age of online booking, but they can be important sources of information when you are considering a big-ticket trip.

“Check with the American Society of Travel Agents. Go to your travel agent. A travel agent will know what’s going on in terms of how you can be protected,” he said.

If your trip involves air travel, you can research your carrier by checking with the U.S. Department of Transportation. The agency’s Aviation Consumer Protection web page includes a wealth of information about your rights as an air traveler. You can read monthly consumer reports showing things like flight delays, mishandled baggage, and consumer complaints by carrier. If your trip includes a charter flight, be sure to check to make sure the operator is approved by the DOT.

And these days, there is no shortage of online platforms where you can check out what other travelers are saying.

“Especially in this day and age of the internet and of social media and everything, check ahead of time if you’re really concerned about something coming through for you to find out whether or not the people operating it have any past experience,” Leocha said.

People who bought into the Fyre Festival might have learned at the very least that McFarland had no track record when it came to running tours — an obvious red flag.

“When you’ve got someone who’s never operated a tour before and they’re promising you the world, I would definitely question it twice before I move forward,” Leocha said.

Because of the limited protections, many travelers purchase trip cancellation insurance to cover their investment. In many cases, the air carrier or tour operator will offer insurance as an option at the time of booking. Some credit card companies provide insurance anytime you use their card to book your trip. But trip insurance has its limitations as well.

“If you have a trip cancellation which is caused by natural events like a hurricane or by an earthquake, you may not be covered. If it’s caused by a war, you may not be covered,” Leocha said. While every policy is different, many only cover specific problems like the airline or hotel going out of business.

“You have to read your trip cancellation policy very carefully and there’s a whole range of them,” Leocha said.

While you are at it, check your other insurance policies before you go. If you are traveling within the United States, health insurance will cover you if you get sick or injured, and your homeowners’ policy might cover you in the case of theft. But if you are traveling abroad, things can get dicey.

“You’ve just got to look at it and see what the actual rules are when you sign your documents and when you’re deciding where you’re going to travel,” Leocha said.

If you do encounter a Fyre-style fiasco — or any other problems — documentation is key. Try to keep careful notes as things are happening. They will help later if you decide to take the tour operator to court. Keep the documentation you received when you booked the trip until after the trip is complete. And promptly file detailed complaints with any agencies or organizations that might have jurisdiction, including the U.S. Department of Transportation, the Justice Department, your state attorney general’s office, and the U.S. Tour Operators Association.

Most important, beware of slick sales pitches that play on your thirst for adventure. McFarland was a master at that. But a little bit of research might have saved his victims from a nightmare in paradise.

See how Billy McFarland lured supermodels, social media influencers, and well-heeled millennials into one of the glitziest frauds of all time. Catch an ALL NEW episode of American Greed – The Fyre Festival – Monday, August 19 at 10pm ET/PT only on CNBC.

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