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ATOL protection for holiday refund credit notes

Emma Lunn
Written By:
Emma Lunn

Holidaymakers who accept refund credit notes for holidays cancelled due to the coronavirus will now be covered by the ATOL scheme.

ATOL is managed by the Civil Aviation Authority (CAA) and underpinned by the government. It protects holidaymakers if they book a trip with a firm that later falls into administration.

Holiday companies have been trying to persuade holidaymakers to accept refund credit notes for cancelled trips since the pandemic took hold in March. But the notes would become worthless if the company issuing them later went bust.

The policy change applies to package holidays including a flight and is designed to boost consumer trust in the aviation and travel sector.

Grant Shapps, transport secretary, 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.”

Martin Lewis, founder of MoneySavingExpert.com, said: “This is a key travel intervention we’ve been calling for. It’s far from a cure-all, but ATOL is a statutory scheme and the fact the government will now effectively underwrite its credit refund notes gives a solid bedrock of security for customers willing to take them.

“And I’d encourage those who it’s right for to do so. The pandemic has been devastating for the travel industry and travellers. Taking an ATOL credit refund note if you’re likely to rebook shows welcome forbearance and flexibility, and the fact that, if you don’t use it, it can be exchanged for cash gives peace of mind.

“Of course it’s not right for everyone, many desperately need a refund. My hope is this more solid halfway house for some will enable firms to more swiftly pay out full refunds for others.”

Under the terms of the Package Travel Regulations 2018, if a holiday is cancelled holidaymakers have the right to a cash refund within 14 days of cancellation. The regulations says that credit notes shouldn’t be automatically sent to customers requesting cash as a strategy to delay payments.

The ATOL fund is run by the UK Civil Aviation Authority (CAA), and requires travel operators to pay a fee of £2.50 to protect each passenger booking in cases of insolvency. The money, which is held in a fund managed by the Air Travel Trust, is used to refund, repatriate or reimburse travellers for the cost of repaying for the affected parts of their trip.

Mark Tanzer, ABTA chief executive, said: “ABTA welcomes the government’s action to back refund credit notes through the ATOL scheme. This gives reassurance to consumers and supports the travel industry at an especially difficult time.

“This development verifies that the ATOL scheme provides protection for cancelled holidays when a refund remains outstanding in the event of a travel organiser’s failure. This is the same for non-flight based package travel with ABTA bonding under the Package Travel Regulations. This assurance enables consumers to hold and rely on refund credit notes with confidence, before rebooking a much needed holiday.”