Holidays are Cancelled, Consumer Rights are Not: CMA investigates refund policies across affected industries

May 27, 2020


2 min read

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What's going on here?

Companies refusing refunds following holiday cancellations due to COVID-19 could face legal action.

What does this mean?

The Competition and Markets Authority, known as the CMA, is a non-ministerial government department and consumer watchdog. Part of its role is to undertake market studies and investigate consumer problems. The watchdog set up a COVID-19 taskforce in March, to “identify, monitor and respond to competition and consumer problems arising from coronavirus and the measures taken to contain it”.

Since the beginning of lockdown, 80% of complaints have been focused on the issue of refunds for cancellations. Andrea Coscelli, Chief Executive of the CMA, said the group is fielding cancellation complaints “in their thousands”, with weddings, holiday accommodation and childcare key areas of concern.

Holidaymakers have been pressured into accepting vouches instead of refunds, often only redeemable at peak times. Wedding venues are also directing couples to their insurance policies rather than providing refunds and nurseries asking parents for high amounts of money to keep places open for their children.

What's the big picture effect?

The CMA have launched investigations into the holiday, wedding and childcare sectors, and is unafraid to take firms to court; consumers are also able to take their own legal action. Consumer law requires that a full refund is offered if a business has had to cancel a contract without providing the promised goods or services. This applies equally if no service is provided due to restrictions resulting from the lockdown.

Investigations are likely to be undertaken into any company in breach of these consumer protection rules. The CMA has jurisdiction over holiday accommodation and private event cancellations, but other regulators will be involved in different areas. Refunds for cancelled flights, for example, are decided by the Civil Aviation Authority.

Many consumers have a legal right to a refund but will be urged to accept alternatives to cash in order to minimise the financial impact on companies.

For law firms, a large amount of litigation is likely going to be generated in the aftermath of COVID-19. If companies don’t meet their legal obligations to consumers in providing refunds, they could find themselves in court. Consumers will be emboldened by the pro-active approach of the CMA in these unprecedented times. 

Whilst holidays have been cancelled, consumer rights to a refund remain clear.

Report written by Rowenna Allen

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