The government is poised to confirm suspension of a key part of the package holiday refund rules in line with industry demands led by Abta.

The legal requirement for travel organisers to refund consumers within 14 days of cancellation is set to be relaxed to prevent the drain on cash during the current crisis driving firms out of business.

Abta issued guidance to members on delaying refunds on Friday and hopes for government confirmation of the changes today.

These would see ‘refund credit notes’ issued to consumers protected by the Atol scheme, initially up to July 31.

The Package Travel Regulations (PTRs) require refunds for cancellations be paid within 14 days, threatening many firms with insolvency amid cancellation of millions of bookings.

However, transport secretary Grant Shapps is poised to relax the rules on Atol refunds according to a report in the Independent. The Department for Transport oversees the Atol Regulations.

Some travel firms have been issuing credit notes or holiday vouchers to consumers in place of refunding cash.

However, vouchers would not be financially protected if the firm subsequently went bust.

Abta has instead been advocating a move to ‘refund credit notes’ which would be protected under the existing rules, as well as demanding relaxation of the 14-day rule.

The association confirmed to members on Friday that it was extending Abta’s own scheme of financial protection to cover refund credit notes valid until July 31.

It stressed “the important distinction” between these and ‘vouchers’ for cancelled holidays.

Abta also confirmed an extension of its March bond-renewal process to April 28, in line with the CAA’s extension of the Atol-renewal process announced a day earlier, and a suspension of Abta’s Single Payment System (SPS) until further notice.

The system processes payments and refunds for members.

Abta apologised for the suspension, saying: “The system was not designed to operate in this environment. The risk to members and Abta is too great.”

The association issued a series of demands on government to mitigate the impact of the crisis on Friday following a meeting with the Departments for Transport and Business on Thursday.

A cross-government meeting on Friday is understood to have considered the demands, including the issue of refunds, with an announcement expected early this week.

An industry source said: “A relaxation of the 14-day rule would be excellent. It would be great if the government said everything is protected up to July 31.”

Should the government fail to relax the PTRs, Travel Weekly understands Abta will advise members the delayed refunds are protected anyway provided businesses stick to issuing ‘refund credit notes’ tied to an Atol booking.

The source insisted: “It has happened anyway, and the CAA and Abta can confirm the refunds are protected under the existing rules.

“The current policy is that a refund owed at the time of a company failure is covered under Atol. The vast majority [of businesses] have delayed. It’s the obvious thing to have done.”

Abta has also asked the government to insist airlines return to refunding customers or their agents for cancelled flights as normal as part of a likely bail-out of carriers expected to be announced early this week.

The source said: “The industry agrees with the special help for airlines. But the airlines should not be able to hoard cash. Part of the deal should be normalisation of dealings with the trade.”