Move it or Lose it: Travel companies told to speed up on refund payments

July 18, 2020

2 min read

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What's going on here?

In an open letter to package holiday firms, the Competition and Markets Authority (CMA) has told travel companies to speed up refunds for COVID-19 cancellations.

What does this mean?

Since March the CMA has reportedly received almost 20,000 complaints from holiday makers who have had their holidays cancelled as a result of the pandemic. Legally, if a provider cancels a package holiday then a full refund should be given within 14 days. However many travel firms have not been complying with this rule. Instead, some holiday makers have been offered vouchers in place of a refund, or have been charged large cancellation fees. Businesses were also reportedly misleading consumers as to their rights, and some have put up significant barriers to prevent customers from exercising them. For example, some customers were told that in order to gain a refund they needed to contact the company by phone, when it was not actually possible  to contact the business in this way. The open letter sets out what it expects businesses to do. Firms which do not comply with the law will be risking enforcement action from the CMA which could result in substantial fines.

What's the big picture effect?

The letter acts as a warning to more than 100 package holiday firms and follows the CMA’s decision to investigate companies’ cancellation policies. Travel firms say that the crisis has left many of them on the brink of collapse. The CMA has recognised these pressures, and states that it is sympathetic to the pressure placed on these companies at the current time, but that businesses must still abide by consumer law. The problem is however larger than just their immediate industry. Many package holiday companies themselves were facing delays in receiving refunds from those further down the line such as hotels and airlines who are holding onto their money in order to stay afloat as their industry has all but disappeared. With each company passing the buck further along the chain it begs the question, where does this chain end? Should the government put an end to it by stepping in with a bail out? Who is to bear the brunt of the lockdown travel ban?

Despite the travel ban now being lifted, this could cause the problem to deteriorate further rather than improving. Travel companies are offering discounted holidays in order to entice consumers to travel and help the companies rid themselves of debt. However, as consumers splash out on the freedom just in time for summer, a second wave could see the travel bans imposed again. This would see the problem begin again, and potentially intensify as firms’ debts become even larger. 

If anything good has come out of the pandemic it could be that travel companies have had a light shone on their unfair practices which many would argue have been going on for years. With the CMA on their backs, travel companies  are seemingly now being forced to clean up their acts. However the balance is that if the CMA pushes too hard in this time of crisis, many firms risk going out of business, and we may see some package holidays gone for good. Only time will tell. 

Report written by Julie Lawford

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