Tourists out of pocket by £7 billion after banks block holiday refund requests

Posted on Tuesday May 12, 2020

Major banks and credit card companies are not accepting refund requests from holiday-makers for coronavirus-related cancelled trips and flights, resulting in tourists now being out of pocket by at least £7 billion.

Many holiday-makers have been unable to obtain cash refunds for hotel and airline bookings, with the companies alternatively offering vouchers or deferred bookings. Package holiday companies are usually required to issue refunds within 14 days of the cancellation if certain criteria are met. Additionally, consumers are generally entitled to full refunds if their flights are cancelled.

Pursuant to The Package Travel and Linked Travel Arrangements Regulations 2018, consumers may be entitled to full refunds for cancelled package holidays. It is clear however that operators are not paying out refunds for the time being, despite being contractually obliged to. Holidays booked through an ABTA travel company benefit from the ABTA support, protection and expertise. This requires Members to comply with ABTA’s Code of Conduct and an Alternative Dispute Resolution scheme.

ABTA are refusing to police members on their approach to not offering refunds regarding COVID-19 on the basis that the travel industry cannot afford to issue all refunds and have called upon the government to release further guidance and aid. The universal position that seems to have been adopted within the travel sector is not to offer a refund as they cannot afford to do so for all.

In these uncertain times, tourists have unsuccessfully resorted to contacting their banks and credit card companies for refunds. Many people are reluctant to accept alternatives to cash refunds from their travel providers due to not being able to travel at a different time and/or the unpredictability of whether the companies will even stay afloat.

By way of background, a credit card holder has the legal right to protection of purchases over £100 (up to a maximum of £30,000), which means the credit card company is just as responsible as the trader; the credit card provider must refund the account holder for the eligible loss incurred.

Although not a legal right, another option for consumers to attempt to seek a redress is by going down the “chargeback” route.  This is where consumers may be able to get their money back for goods or services purchased using their debit or credit cards by contacting the bank that issued the card.

Andrew Coscelli, CEO of the Competition and Markets Authority (CMA), said: “The current situation is throwing up challenges for everyone, including businesses, but that does not mean that consumers should be deprived of their rights at this difficult time. If we find evidence that businesses are failing to comply with consumer protection law then we will take tough enforcement action to protect those rights.”

It remains to be seen as to the decisions banks and credit card companies will ultimately take in terms of issuing refunds. However, consumers do have the opportunities to report businesses to the CMA Taskforce for behaving unfairly during the COVID-19 outbreak, and take their complaints to the Financial Ombudsman Service in circumstances where credit card companies refuse to observe the statutory refund requirement. Alternatively, refunds can be pursued via legal proceedings.

If you are out of pocket due to cancelled holiday arrangements, contact Thomas Hulme in the Travel & Tourism Litigation Team at Mackrell.