Are holiday deposits and cancellation fees fair?

This is a guest post by Paul Latham. All views expressed are Paul’s own and not necessarily shared by Which?.

At the Competition and Markets Authority (CMA), our aim is to make markets work well for consumers.

That’s why we’re running the ‘Small print, Big difference’ campaign in the travel and holiday sector to encourage businesses to ‘check in’ on their terms and conditions to make sure they’re fair.

If you are unfortunate enough to have to cancel a holiday or trip, do you know how to check that you’re being treated fairly?

What are ‘fair terms’?

Under consumer law, businesses must make sure their terms are fair. If a term is considered unfair by a court, then it can’t be enforced against the customer – so just because you’ve signed up to something, it doesn’t necessarily mean the terms are legally binding.

Deposits, advance payments and cancellation fees are areas where it’s particularly worth looking out for unfair terms.

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If you have to cancel, the business might keep some of your upfront deposit or ask you to pay a fee to cover its losses. This is fine, as long as the amount it keeps relates to what it is actually losing as a result of a cancellation.

Terms and conditions that don’t follow this approach – for example, where the business keeps a large upfront deposit which bears no relation to its losses – are likely to be unfair. As a general rule, deposits should only be a small percentage of the total cost.

In practice this means that if you cancel a booking or order and a business resells it, you could be entitled to some money back.

Travel firms can either use a case-by-case system, where people are refunded if and when a replacement booking is made, or they can have general terms and conditions based on how likely it is that they will be able to resell any cancelled bookings as the date of the booking approaches.

Both approaches can be fair under the law, so long as customers are getting back a reasonable amount.

How can you make sure you are treated fairly?

Talk to the business and ask it to justify the amount of any fee charged for cancelling your holiday. If you still think you have been treated unfairly, you can go to Citizens Advice and get advice from its consumer service on 03454 040506 or 03454 040505 for Welsh language speakers.

Consumers in Scotland can call Consumer Advice Scot on 0808 164 6000. Alternatively, you can report an issue to your local Trading Standards Office and you can also escalate your complaint to the courts.

The CMA’s focus is on highlighting the importance of fair terms to businesses – we believe most businesses want to do the right thing but may not understand the law on unfair terms.

We are encouraging them to make sure their terms are up-to-date and fair to consumers. Enforcers such as Trading Standards and the CMA can also, in certain circumstances, take enforcement action to stop a business from using unfair terms.

In a national survey of 2,000 people we commissioned from Ipsos Mori, 66% felt that travel and holiday businesses do not always make it as easy to cancel a booking as they should. Do you agree?

Of those with experience cancelling a booking, 1 in 5 felt that they had been treated unfairly. If you have had to cancel a booking, do you feel you were treated fairly?

This was a guest post by Paul Latham. All views expressed were Paul’s own and not necessarily shared by Which?.