Government guarantees package-holiday refunds

Consumers who accept refund credit notes for cancelled package holidays will get their money back if the issuing travel firm later collapses, the Government has announced.

The Civil Aviation Authority (CAA) said the Department for Transport had provided “much-needed clarity” by confirming that such cases will be covered by the Atol scheme.

Package holiday customers whose trips have been cancelled due to the coronavirus pandemic are entitled to a cash refund, although many travel companies are offering refund credit notes to help their cash flow.

These allow customers to rebook their holiday or request their money back at a later date, but there have been doubts as to whether they are protected by Atol.

The scheme is normally used to stop package holiday customers being stranded abroad or losing money from future bookings when operators collapse, as happened with Thomas Cook in September 2019.

Consumer group Which? has been advising people to reject refund credit notes and “insist on a refund” because of concerns about them being worthless if the issuing firm goes bust.

Transport secretary Grant Shapps said: “We want to send a clear message to passengers that they can book their summer holidays with confidence, which is why we’re stepping in to protect refund credit notes issued as a result of Covid-19 cancellations.

“This is not only good news for anyone looking to get away for a break in the sun, but also for the aviation and travel sector which has been hit hard by the pandemic.”

The announcement covers refund credit notes issued between March 10 and September 30 for package holidays cancelled due to Covid-19.

Consumers remain entitled to a cash refund within 14 days, although thousands have been forced to wait longer to get their money back.

CAA consumer director Paul Smith said: “This news provides much-needed clarity for consumers, who should now feel confident that their money is secure if they have chosen to accept a refund credit note for their cancelled Atol-protected booking.”

Travel trade organisation Abta said the announcement “gives reassurance to consumers and supports the travel industry at an especially difficult time”.

Some travel firms are offering vouchers rather than refund credit notes.

Although these are often worth more than the original booking, to incentivise customers not to request cash, the CAA said they are not Atol protected.

The Government is the financial backer for the Atol scheme, which is run by the CAA.

Travel firms are required to contribute £2.50 for every package holiday customer. The money goes towards a fund which is used to repatriate or refund travellers in cases of insolvency.