The article below is reproduced from The Times newspaper on April 29, 2020.
It is stressed that it's scope applies solely in the UK.
Coronavirus travel: Banks block billions in lost holiday repayments
Andrew Ellson, Consumer Affairs Correspondent
Wednesday April 29 2020, 12.01am BST, The Times
Holidaymakers trying to get their money back for trips disrupted by the coronavirus outbreak have been blocked by banks despite having a right to refunds.
Travellers are owed an estimated £7 billion for unused holidays and flights amid anger at the lack of government action to resolve the problem.
They are entitled to a refund within 14 days if their holiday is cancelled, and seven days for flights. But travel operators are offering credit notes or deferred bookings instead.
Many holidaymakers are unable or unwilling to accept the notes because they cannot travel at a later date or are worried that the notes will be worthless if the companies go bust. The industry has been urging the government to step in to guarantee the notes but ministers have failed to act.
Thousands of travellers have turned to their banks and card operators, who are legally obliged to refund eligible customers. Under Section 75 of the Consumer Credit Act, customers who booked their holidays or flights on a credit card can claim back the cost from their bank provided that the cancellation amounts to a breach of contract.
However, some have been told that they are not eligible or that they must exhaust all avenues with their travel company first, which is not required in law.
The Competition and Markets Authority says that four in every five complaints it is receiving at present relate to travel refunds. The watchdog is expected to announce a crackdown on unfair practices soon.
Last week it said that it was “particularly concerned” about companies refusing refunds, introducing unnecessary complexity into the process and pressuring holidaymakers to accept vouchers. Industry figures expect the government to issue a statement soon to guarantee credit notes.
In one case involving a bank, First Direct told a customer that it was not processing such claims because Visa was pausing all refunds. Visa has confirmed that it has nothing to do with such cases.
Disputes over these refunds are civil matters and the Financial Ombudsman Service, which adjudicates on complaints between banks and their customers, says that it expects the industry to continue to process claims.
A spokesman said: “We recognise this is an unprecedented situation but there is no reason not to process these claims as usual.”
Some banks also appear to be unfairly preventing their debit and credit card customers from making “chargeback” claims. Visa and Mastercard holders, under their terms of service, can ask their bank to initiate a chargeback dispute if a company does not provide the service that has been paid for.
The bank would contact the card company, which would then get the money back from the travel company’s bank. The cash would be returned to the customer and the travel provider’s bank could try to recoup the cost.
Banks usually prefer their customers to make chargeback claims because they do not have to refund the money out of their own pocket. However, each claim involves extensive paperwork and customers of several banks, including Halifax, Metro Bank and RBS, say that they have been told they are not eligible because they have been offered credit notes, an approach that contradicts the guidance issued by Visa and Mastercard.
Which? says that the number of people using the chargeback and Section 75 tool on its website has reached 10,000 since the start of March, compared with 1,000 in January and February.
Gareth Shaw, of the consumer group, said: “While it is a very difficult time for businesses, the coronavirus outbreak has also put people’s finances under considerable pressure. There needs to be greater clarity and consistency about claiming through banks, and the industry should ensure that all customers have a fair chance of getting their money back.”
Senior industry figures acknowledge that there have been problems, with one admitting that some staff appear to be giving customers the wrong advice, but they insist that the issues are a “(mess) up rather than conspiracy”.
UK Finance, which represents the industry, said: “Generally speaking, if the supplier of goods or services has not delivered what has been paid for through a credit or debit card, then customers should be able to get their money back. However, it is important to note there is not an automatic legal right to receive your money back through chargeback rights or Section 75 as this will depend upon all the relevant facts in each case.”
My holiday was cancelled but I have been only offered vouchers, what can I do?
You can wait until your travel operator may be able to offer you cash or approach your bank, which should be able to get your money back though it will depend on the terms of your booking.
How should I approach my bank?
If you paid on a credit card make it clear that you want a refund under Section 75 of the Consumer Credit Act. You do not have to go to your travel provider first although your bank may well ask for evidence that you have not been given a refund.
What can I do if my bank refuses to pay?
Be persistent. If your bank refuses without offering a valid explanation, raise a complaint. If your bank still does not budge you can take your case to the Financial Ombudsman Service, which could force the bank to refund you.
What if I paid for my flights or holiday on my debit card?
You can still approach your bank and ask them to start a “chargeback” dispute. You will need evidence that you have not been refunded.
Is there any help available?
Yes, the consumer group Which? has a free tool on its website to help with Section 75 and chargeback claims.
Could anything change?
Yes. If the government comes out in support of credit notes and guarantees them then it is feasible that they will be considered as good as a refund. If so, banks may accept them in return for cash, in which case customers will not be able to make Section 75 or chargeback claims.