/ Travel & Leisure

Are holiday deposits and cancellation fees fair?

The Competition and Markets Authority (CMA) wants travel and holiday companies to ‘check in’ on their terms and conditions. Are customers being treated fairly?

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.

Which? calls for ban on return flights being cancelled when passengers miss their outbound journey

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?.

Comments

Should we be able to cancel a non-flexible flight booking and receive a full refund if the airline subsequently sells tickets on the flight to full capacity, on the basis that the non-refundable clause is unfair?

After all, airlines sometimes cancel flights and give full refunds on non-flexible tickets for operational reasons or because they decide that the route is no longer profitable. If the passenger can’t cancel and the airline can, then this is a significant imbalance in the parties’ rights. Regarding unfair contract terms, Section 62(4) of the Consumer Rights Act 2015 states that “A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer“.

DerekP says:
9 July 2019

That’s an interesting point. I suppose the same principle might also apply to hotel bookings.

Hotel bookings are usually made under the laws of the country where the hotel is located, so the Consumer Rights Act 2015 wouldn’t apply.

Presumably it would apply to UK hotels, for those of us without international jet set lifestyles 😉

What about package holidays? Don’t tour operators have block bookings to fill on flights and hotels?

Yes, alfa, package holidays are what this article was originally about. I then focussed more specifically on flight-only bookings.

A few years ago I was involved with a case where an on-line package holiday booking was made on a ‘non-refundable’ basis and the full amount had been paid to the operator. Two weeks before the holiday departure date one of the family, who had made the booking, died suddenly and without medical prognosis. As executor I cancelled the booking and tried to recover the cost, or as much as was reasonable, from the operator – on the basis that the travel seats could be resold, the hotel accommodation would not be taken up and could be re-let, and that there would be savings on food, cleaning, and other services even if the accommodation was not re-let.

The travel company made it extremely difficult to resolve this, initially by insisting that the on-line operation was entirely separate from the high street service so no one would deal with me face to face. When I could talk to someone they insisted that the non-refundable terms were conclusive and non-negotiable and there was no discretion to give a refund because the holiday was priced to reflect the refunding restriction. In the end I had to drop the claim because it was getting nowhere and just adding to the distress of the relatives. The terms were clearly unfair, and some recompense should have been made, but the company got away with it.

It is well known that airlines overbook knowing that some passengers won’t turn up for flights.

We were once at LAX and United Airlines were asking for volunteers to fly the next day and they would pay the accommodation and I think $50. We had seats on that flight and offered but only if we could upgrade to 1st/business class. UA would not upgrade us so we kept our seats.

I seem to remember UA were trying to deal with about 60 unhappy people who did not have seats on the flight they had paid for.

On other flights, UA would have received payment twice for seats so it is wrong not to reimburse passengers.