It has been reported recently that holidaymaker's claims to credit and debit card providers under consumer protection laws are 'being blocked by banks'.
Where a service provider has failed to provide a service and therefore has breached the contract, consumers can seek redress against credit or debit card companies (so-called section 75 or chargeback claims).
The backdrop is that following the lockdown measures imposed on the country, hundreds of thousands of travellers have had holiday plans disrupted. Flights and holidays have been cancelled and in the event of a cancellation, tourists are entitled to refunds.
For flights regulated by EU261 (which includes all flights departing from the UK), in the event of cancellation, the airline should provide a refund within 7 days. A refund within 14 days should be provided for cancelled holidays to which the Package Travel Regulations apply.
It has been widely reported that these deadlines are not being complied with. Some airlines require customers to speak with understaffed call centres to process refunds, often customers simply cannot get through. Internet based claim functionality is not available in many cases. Airlines and tour operators are offering vouchers for future travel instead of refunds. The sympathetic view is that companies in the travel industry are trying to ensure their future viability - they have contractual commitments they need to keep and don't have the cash reserves they need to deal with refunds. Easyjet has recently secured an emergency loan from the Government and Richard Branson has reportedly offered his beloved Necker Island as collateral against a government loan. Trade associations are calling on Government to relax the obligations on tour operators under the applicable regulations relating to refunds.
Consumers, no doubt financially pressed themselves, rely on the law and require reimbursement from those with whom they have contracted. Consumers cannot be forced to accept vouchers instead of a cash refund. For those potentially willing to accept a voucher, their fear is the provider going bust or vouchers being time limited. When customers are not necessarily being provided what they are entitled to, they are forced to explore other options.
Travel insurance is not there to plug a gap where an airline or tour operator does not fulfil its legal obligations.
Section 75 of the Consumer Credit Act 1974 provides that where a supplier is in breach of contract, a credit card company is jointly and severally liable for the breach of contract (there is an equivalent 'chargeback' scheme where payments have been made by debit card). To the extent that a cancellation amounts to a breach of contract it is no wonder that in circumstances where customers cannot obtain refunds to which they are legally entitled, they are looking to other sources to recover their money, hence the apparently significant volume of 'section 75 claims'.
The banks are reported to have pushed back on these claims and will only consider them once all other avenues have been pursued. Such a stance is not within their gift as the law stands. Whilst a claim to the airline/tour operator and a credit card company can be pursued concurrently, a recovery cannot be made twice. There is anecdotal evidence of customers accepting vouchers and then seeking to claim additionally from travel insurers and or their bank.
The unprecedented disruption of the coronavirus crisis was not contemplated when these various pieces of consumer protection legislation were drafted, yet as they stand, the obligations are clear and unarguable. There is no getting away from the fact that presently those obligations are not being adhered to by some airlines, tour operators and credit card companies.
Ian Brown is a Partner in the Travel, Tourism and Insurance team and advises regularly on insurance disputes, policy wording interpretation and foreign personal injury matters.
