Warning: the risk of accepting credit or vouchers for your cancelled holiday

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Hundreds of thousands of holidaymakers are scrambling to claim refunds from their travel agents or tour operator after being forced to cancel trips due to travel restrictions imposed around the world to prevent the spread of the coronavirus.

 

However, due to the avalanche of cancellations, many travel companies don’t have enough money in the pot to refund all their customers in one go, especially as many of them are waiting to receive refunds from airlines and hotels, some of which aren’t paying up.

 

If every customer insists on an immediate cash refund, very many of these holiday companies will go bust. And I’m not just talking about the smaller companies, either. An industry source told me last week that several ‘household names’ are also on the brink.

 

So instead of offering cash refunds, many companies are giving ‘refund credits’ or vouchers instead. Some are making it clear these can be exchanged for cash at a later date, others are insisting the credit or voucher can only be used to book another holiday, with some putting expiry dates on the credit.

 

If you’ve been offered a voucher or a refund credit, what are your legal rights and what should you do?

 

First of all, the law is clear that if you booked a package holiday – which is a flight plus another element, say accommodation or a tour – your travel provider must issue you with a cash refund within 14 days of the cancellation.

 

This law might be changed within the next few days, maybe even as early as today because ABTA has asked the government to relax the Package Travel Regulations to allow travel companies more time to pay.

 

However, at the time of writing, if you booked a package which has been cancelled, or you had to abandon a holiday when the Foreign Office advised against all overseas travel, you still have a legal right to a cash refund for all or part of your holiday if you had to come home early. If you are offered anything else, you have the right to refuse and insist on cash.

 

That said, if everyone insists on cash refunds and travel companies go bust as a result, you’ll have to reclaim your money either from your credit card (if that’s how you paid) or from the Air Travel Trust Fund, in which case you won’t get your money back any quicker.

 

So, should you accept credit instead?

 

That sort of depends on what form of credit you’re being offered. You definitely should NOT accept a voucher because this might not be financially protected by the ATOL scheme so if the company goes bust, you could lose all of your money.

 

ABTA is advising travel companies to issue ‘refund credits’ instead. It insists that these ARE protected by the ATOL scheme so if a travel firm goes bust before you’re able to claim your credit, you should be able to claim your money back from the Air Travel Trust Fund.

 

However, there are two problems here.

 

The Civil Aviation Authority, which governs the ATOL scheme and is responsible for refunds from the Air Travel Trust Fund, has not confirmed that refund credits are financially protected so, while it seems highly unlikely that ABTA would be mistaken here, there is a risk the ATT might not pay out if your travel company goes bust. The government might provide clarity on this later this week, but at the moment, I believe these could be risky.

 

I should also point out that if your travel company goes bust before you manage to spend or cash in your credit, it could take a very long time to get your refund from the Air Travel Trust Fund.

 

Secondly, some travel companies are insisting (contrary to ABTA’s guidance) that the refunds can only be used for re-booking within a fixed period, so if you’re unable to take another holiday within the specified timeframe, you’ll lose your money. Under these circumstances, I’d refuse and insist on a cash refund.

 

This is undoubtedly a very difficult situation for holidaymakers and for the travel industry, which, understandably, had never envisaged such widescale cancellations. Many companies are trying to do the right thing by their customers, but some – probably out of sheer desperation – are trying to pull the wool over our eyes and bounce us into accepting potentially worthless bits of paper.

 

I’m currently trying to sort out refunds for one cancelled and one aborted holiday with the same company, which has offered only time-limited vouchers for both. I’ve refused and requested a cash refund, but if the government makes it clear within the next few days that refund credits are ATOL-protected then I would be inclined to accept this instead and cross my fingers the company in question stays afloat.

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