Holidaymakers to get money back from Refund Credit Notes if firms go bust

18 July 2020, 00:00

Holidaymakers could get their money back if the travel firm they booked through later collapses
Holidaymakers could get their money back if the travel firm they booked through later collapses. Picture: PA
Nick Hardinges

By Nick Hardinges

Holidaymakers will get their money back if they accept Refund Credit Notes when their package holiday is cancelled and the travel firm later collapses because of coronavirus, the Government has announced.

The Refund Credit Note scheme has now been given Atol protection by the Department of Transport, a move the Civil Aviation Authority (CAA) said provided "much-needed clarity."

People who booked package holidays are currently entitled to cash refunds if their trip is cancelled due to the coronavirus pandemic.

However, many travel companies are offering Refund Credit Notes (RCNs) rather than monetary refunds to protect their cash flow.

RCNs allow customers to re-book their holiday for a later date or request their money back if their holiday is cancelled, but doubts remained over whether they were protected by the Atol scheme.

Atol prevents package holiday customers from being stranded abroad or losing money from future bookings when a travel firm collapses, as happened with Thomas Cook's demise in September 2019.

Consumer group Which? has been advising people to RCNs and "insist on a refund" because of concerns about them being worthless if the issuing operator goes bust.

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However, Transport Secretary Grant Shapps said today: "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 RCNs issued between 10 March and 30 September for package holidays cancelled due to the coronavirus outbreak.

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

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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."

Which? Travel editor Rory Boland said the clarification will be "a huge relief" to customers who have accepted RCNs.

He added: "This is a positive step towards restoring trust in the travel industry."

Some travel firms are offering vouchers rather than RCNs - which can be worth more than the original booking, to incentivise customers not to request cash - however 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.

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