Covid-19

CMA warns on refunds

The Competition and Markets Authority has written to over 100 package holiday providers warning them of possible enforcement measures if they fail to refund customers.

The CMA said that it had received over 17,500 complaints about companies failing to provide refunds within the required 14-day timescale.

Cecilia Parker Aranha, CMA director, wrote: “Intelligence suggests that businesses may not be providing the refunds required by consumer law when package holiday contracts are terminated as a result of Covid-19. The CMA expects that consumers who are entitled to refunds will be paid those refunds, and that businesses will comply with consumer law.”

The CMA added that it had concerns over consumers only being offered a voucher or the right to rebook a holiday instead of a refund, as well as consumers losing their deposits and/or being charged cancellation fees. There had also been instances when consumers had been asked to request a refund on their terminated package booking by telephone, but had been unable to readily contact businesses in this way.

Aranha added: “The CMA recognises that the pandemic has created extraordinary pressures on package holiday businesses. Although we were sympathetic to the challenges faced in the early days of the pandemic, it is nonetheless important that businesses comply with consumer law.”

Neil Baylis, partner, Mishcon de Reya, told us: “There are three big legal hot topics at the moment.   One is insurance claims (non payment of claims) with the FCA now getting involved.  Two is contractual disputes for non payment/non-performance generally.  

“Three is refunds on air tickets and package holidays - making up 90% of all complaints to the CMA at the moment. It looks like the CMA is now taking up the consumer cause and there is a risk for the industry as the UK government has so far not issued any formal or informal support for the use of vouchers or credit notes  - notwithstanding that the Commission and various Member States have done so.”

The WTTC joined the call for more “flexibility” around Package Travel Requirements, giving travel agents and tour operators more time to refund customers.

The group said that more than six million jobs were at risk in the EU and one million in the UK. The organisation described the comments as an “urgent call to prevent travel & tourism sector buckling under the pressure of COVID-19”.

Gloria Guevara, president & CEO, WTTC, urged EU authorities and the UK government to implement flexibility around consumer refunds to “alleviate the unbearable pressure on the travel & tourism sector”.

Research conducted by WTTC showed that 75 million travel and tourism jobs were at risk globally due to the COVID-19 pandemic, with at least 6.4 million losses across the EU, and one million in the UK.

WTTC said that the existing Package Travel Requirements, were “not appropriate or fit for purpose in the present crisis circumstances, and should be suspended at least until August. Consumer protection will be unaffected, but travel agents and tour operators will have more time to refund those customers choosing to cancel their existing bookings.

“The current 14-day timeline for refunds is putting enormous burdens on businesses in the Travel & Tourism sector and will lead to major bankruptcies. These, in turn, will lead to more claims by consumers on credit card firms and ultimately government bonded schemes.”

Guevara said: “This measure should be implemented immediately and help lift the already crushing financial pressure on Travel & Tourism organisations and save the millions of livelihoods that depend on them.”

 

Insight: There can be no denying that the law in the UK allows for a refund. There can also be no doubt that many travel companies cannot afford to refund everyone. And there is absolutely no doubt that it’s that much harder to get a refund from a company which goes bust.

Where all the doubt is, is what the UK government would suggest being done to resolve the issue. The EU was quick to act on refunds - backing a voucher scheme (if you really must have cash then you can, depending on the country, wait for it or insist on it). It was hoped that the UK government would come out in favour of a similar scheme, with ABTA amongst the groups lobbying intensively for some kind of guidance.

But, with the only guidance in place that of using British Common Sense, customers have been reduced to flaming companies on social media to get their refunds instead. This is stressful for them and the companies involved and does nothing for the wider cause of the travel industry. But, given the government’s approach to travel this summer - first the quarantine, then this week warnings of extensive faff when people travel to the EU - anyone would think it didn’t want to encourage travel anyway.