The Competition and Markets Authority has told Virgin Holidays to fulfil refunds for holidays cancelled due to the pandemic, or face legal action.
The CMA said that it had secured payment commitments from a number of companies, including TUI UK.
Andrea Coscelli, CEO, CMA, said: “People whose holidays have been cancelled due to coronavirus deserve a prompt and full refund. Our action means that Virgin Holidays customers should receive all their money back without further delay.
“We are continuing to investigate package holidays in relation to the coronavirus crisis. Should we find that any business is not complying with consumer protection law, we won’t hesitate to take action.”
The CMA said that even when customers were informed by Virgin Holidays that they would receive a refund, many had to wait for “an unreasonably long time”, with some being told they would have to wait 120 days to receive their money back. Since 1 March 2020, the company has received 53,000 refund requests.
To ensure that Virgin Holidays adheres to its commitments, the company must provide the CMA with regular reports on the progress of its repayments.
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: Anecdotal evidence suggests that, going into the winter season, one of the factors holding people back from booking a break over the festive season - let’s ignore business travel for a moment - is the fear that they will be unable to take the break because of the pandemic and will then have to devote one third of their walking hours to trying to claw back a refund. Hotels looking for business take note; easy refunds are even more of a lure than free wifi at the moment.
The CMA exists to protect consumers, not the travel sector, so companies looking to preserve cash are fresh out of luck here and the UK government has shown itself unwilling to following the EU into greater support in this area.
Back to business travel and there are signs that countries are thinking of limiting quarantines for those who flit in and out of countries for meetings, a hopeful sign which airlines and hotels would love to bank on, refund not required.