Suppliers are being urged to cover the costs of chargebacks to agents as customers seek refunds through credit cards, with Abta poised to issue guidance on handling chargebacks this week.

Voluntary agreements between card companies and card-issuing banks leave it largely up to the banks to decide how to process chargebacks and it often suits them to hit agents.

Section 75 of the Consumer Credit Act makes credit card issuers and suppliers jointly liable to refund payments for cancelled holidays. Agents served with a section 75 chargeback can successfully challenge this.


MoreAdvice: At-a-glance guides to Refund Credit Notes and chargebacks


But rather than go through this process, card issuers frequently process claims as ‘normal’ chargebacks outside of Section 75 and simply take the money from an agent’s account.

Angus Kinloch of Ski Line in Beckenham suffered a £40,000 chargeback last week, having expected a Section 75 request which he could defend. He said: “We’re going to be hit with a load more of these. Why should agents carry the can? Why should we refund the full amount? I’ve never had a chargeback in 25 years.

“Our agency agreements have a clause saying tour operators will indemnify us, but I’m concerned the tour operators will go bust. This is an issue for every agent.”

Lawyer Farina Azam of Kemp Little explained: “Agents are not subject to Section 75 chargebacks and there is a straightforward defence. [But] it’s administratively easier for the banks to chargeback under their normal [voluntary] scheme.”

Conflicting guidance from card issuers is also complicating attempts to resist. Azam said: “You can’t get a straight answer on whether card issuers will treat a refund credit note as an alternative to a refund if the customer won’t accept it. If card issuers don’t accept them it’s a refund by the back door.”

Visa and Mastercard state in Covid-19 guidance that merchants “can offer a credit for future use” in place of a refund “if acceptable to the cardholder”, but should process a refund if the cardholder declines. However, Visa allows an exception where “cancellation is due to government prohibition” as this “supersedes Visa rules”.

Mastercard says the opposite, insisting: “There is a chargeback right when services are not provided, including when they are cancelled due to government restrictions.”

Advantage Travel Partnership chief executive Julia Lo Bue-Said said: “We’ve written to all supplier partners reminding them our members are agents on their behalf. If customers put in a chargeback we expect them to process it.”

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