Travel companies are among the worst offenders for failing to deliver goods and services paid for by customers in advance, a consumer watchdog has found.
A TNS survey of 16,010 people, conducted between March 18 and April 7 for Consumer Focus, an organisation that campaigns for a fair deal for consumers, found one in 10 respondents had paid for goods and services that they never received, and less than half (48%) managed to get a refund.
Of those who had lost out by paying upfront, 11% had been stung by a travel transaction.
According to Consumer Focus head of fair markets Steve Booker, the economic downturn is exacerbating the problem, as going bust was the main reason why companies were failing to honour their end of the deal.
“The recession is forcing many consumers to cut their spending, and holidays are often one of the first luxuries to be sacrificed.
“This loss in revenue, combined with high oil prices and stiff competition, have forced many low-cost airlines into bankruptcy, and our report shows this is one of the main reasons why consumers are losing their money.”
One solution would be to bring parity between consumers who pay upfront with credit cards, and those who pay with cash, debit cards or by other prepayment methods.
At the moment, holidays booked with a credit card are protected, but in 45% of prepayment transactions, debit cards are used. As a result, the watchdog recommends all prepayment purchases offer the same statutory payment protection.
Such a change in the law could help prevent the sort of confusion that erupted recently when a car hire company refused to honour bookings made and paid for through Harvey World Travel, because the travel agent failed to pass on the money before going bust.
Similarly, it could help avoid the chaos that ensued after last year’s collapse of XL Leisure Group, which resulted in 30,000 customers losing out on compensation.
Dynamically packaged holidays could also be covered.
Booker said: “Travellers’ money is protected if they book a package holiday, but dynamic packages don’t have such guarantees.
“The law needs to be changed to reflect the different ways we book our holidays these days.”
The Consumer Focus findings will be taken into consideration by Parliament as part of the government’s Consumer White Paper, which is reviewing consumer protection in consultation with the Department for Transport, the CAA, other government departments and the travel trade.
More than 24 million prepayment transactions are made annually by 20 million consumers every year.
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