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Holiday firms refuse refund requests from customers in local lockdown

Paloma Kubiak
Written By:
Paloma Kubiak

Holiday firms are using an ‘anomaly’ in the law to wriggle out of refund claims made by customers living in local lockdown areas, it has been revealed.

In the last few weeks, a number of local areas across the UK have gone into lockdown after experiencing a rise in coronavirus cases.

And in south Wales, four counties – Bridgend, Blaenau Gwent, Merthyr Tydfil and Newport – will be subject to stricter measures as of 6pm tonight.

However, the MP for Merthyr Tydfil and Rhymney revealed that the local lockdown rule has opened up a problem when it comes to these residents cancelling holidays due to the restrictions.

Speaking in the Commons, Gerald Jones, Labour MP, said: “By 6pm this evening, both local authorities covering my constituencies will be under Welsh government local lockdown restrictions aimed at slowing the spread of the virus.

“Among the restrictions will be a restriction on holiday travel meaning constituents will not be able to go on planned holidays.

“And some holiday companies are refusing refunds on the grounds that local restrictions aren’t covered by UK law, and pointed instead to FCO [Foreign and Commonwealth Office] advice on travel.

“So what can the Prime Minister do to support constituents in this case and what is his message to these holiday companies?”

In response, the Prime Minister, Boris Johnson, said: “He asks an excellent question and this is not an anomaly I had been aware of but if he would care to write to me with the details of his constituents’ concerns, I will certainly take it up.”

What’s the law on flight and holiday cancellation and refunds?

FCO warnings are important as they are usually the trigger for travel insurance cover. When one is in place, such as advising against all but essential travel to a certain destination, it usually means you can claim for cancellation on your travel insurance if you can’t travel.

If you decide to travel despite an FCO warning, your insurance will normally become invalid.

Where a flight has been cancelled, under EU law, you should be offered a full refund within seven days or alternative flights. 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.

However, as the problem highlighted by the Welsh MP centres on local lockdown restrictions preventing holidaymakers from travelling, rather than the flight or holiday being cancelled by the airline or holiday firm, this is where the problem, or ‘anomaly’ as Johnson called it, lies.

The airlines and firms can argue that the flights or package holidays are continuing to operate or go ahead, therefore refusing a request for a refund on these grounds. Further, customers may find they’re charged big fees to re-book once local restrictions have been eased.

By cancelling a holiday or flight which is still scheduled to go, customers would lose their money as this is treated as ‘disinclination to travel’.

Holidaymakers in local lockdown areas should check the FCO travel advice to see if their destination has been removed from the safe travel list, triggering a refund.

Alternatively, they should check their travel insurance and contact overseas hotels or attractions to see if they will offer refunds.

Aman Johal, lawyer and director of Your Lawyers, said: “With the pandemic serving up a variety of different problems in the travel sector, companies refusing refunds for customers under local lockdown is unsurprising. This may feel unfair and unlawful, but whether a consumer is entitled to a refund or not will depend on the terms and conditions of the contract in place.

“There could be an argument for ‘force majeure’ in the case of unforeseen circumstances but, if the contract does not explicitly stipulate that a local lockdown will result in a refund, a company may not be legally required to refund the travel costs.

“These are uncertain times, and there is little in the way of a clear precedent for what should happen. While it feels wrong that consumers should suffer as a result of unforeseen circumstances, it is unsurprising that struggling businesses in the hard-hit travel and tourism sector are reluctant to issue refunds. At the very least, we would expect that, if a refund is not possible, customers would be allowed to use the money they have paid for a future date instead.”

The Competition and Markets Authority (CMA) has also recently reminded firms and consumers of the contract, cancellation and refund laws. As part of its guidance relating to contracts that can’t go ahead due to lockdown laws, a contract is referred to as ‘frustrated’. This means that due to no fault of the parties, something happens after the contract was entered into which means it can no longer be performed at all or performance would be radically different to what was agreed.

Here, the CMA said the contract comes to an end and, where consumers have paid money in advance for services or goods that they have yet to receive, they will generally be entitled to obtain a refund.

It also includes restrictions imposed by local lockdown laws and states that “businesses should not require consumers to take unreasonable or unnecessary steps in order to obtain refunds. A business imposing such barriers may breach consumer protection law by doing so.”

However, where a service can legally be provided as agreed, but a business or consumer does not want to go ahead with the arrangement, for example because of government guidance, then the position is more legally complex, the CMA noted.

It added that where government guidance does not contain legal restrictions, it is not clear whether a contract would be considered to have been legally ‘frustrated’. Therefore, customers are advised to check whether local lockdowns are legal restrictions which would suggest a contract may be legally ‘frustrated’, generally entitling the consumer to a full refund.

The guidance adds: “In any event, the CMA takes the view that businesses should treat consumers fairly and responsibly in these circumstances and this may include trying to find a mutually acceptable solution.

“Otherwise the consumer will be entitled to cancel and seek a refund in line with the applicable pre-existing terms and conditions, provided that those terms and conditions are fair.”