Travel sector reassured after cancellation charges criticism

Travel firms have been reassured that wholesale changes in rules governing holiday cancellation terms are not on the cards after the sector came in for scathing criticism this week.

A review is underway into the new Consumer Rights Act, which became law in October, but the Competition and Markets Authority (CMA) confirmed it would not focus on travel.

A spokesman for the CMA denied a report in the Daily Telegraph this week that claimed the CMA watchdog was closing in on “heartless holiday companies” that “profit from the illness and death of their customers”.

The newspaper suggested thousands of customers who have to cancel their holidays due to bereavement or ill health, either their own or a family member’s, are being left out of pocket, while firms resell their cancelled holidays.

However, a CMA spokesman told Travel Weekly: “The Consumer Rights Act impacts on a variety of things and unfair terms is one of them. We have people looking at the impact it is having, but not on holidays in particular.”

Farina Azam, a legal expert from special law practice Travlaw, said tour operators use of a sliding scale of cancellation charges has been endorsed by the Office of Fair Trading.

“With a sliding scale, the closer a customer gets to the date of departure, the higher their cancellation charges will be, generally speaking.

“However, as with all consumer contract terms, the charges must be ‘fair’ and represent a genuine pre-estimate of the company’s loss on cancellations, as at the date the contract is concluded with the consumer.

“The cancellation changes can also be calculated on the assumption the tour operator won’t manage to re-sell the holiday, taking in to account the company’s trading history in this respect.

“Travel companies shouldn’t be seeking to profit from a customer’s cancellation but they also don’t have to make a loss.

“It’s also worth noting that many transport providers have strict changes and cancellations policies and tour operators are bound by these – if tour operators cannot obtain refunds from the transport providers, they are entitled to pass these loss on to the consumer.

“Last but not least, what about travel insurance? Travel insurance is there to cover customers in situations such as these and tour operators shouldn’t be afraid to direct customers to make a claim on their policy – that’s what the customer has paid their premium for.”

Abta has not been approached by the CMA about the issue. The association said in a statement:

“The issue of tour operator cancellation charges has been looked a number of times over the years, most recently during the review of the Package Travel Directive.

“Prior to that, the Office of Fair Trading issued guidance in 2004 on unfair terms in package holiday contracts in the context of the Unfair Terms in Consumer Contracts Regulations 1999.

“That guidance and the revised PTD specifically provide for the use of a sliding scale of cancellation charges in cases where a consumer cancels a booking for reasons other than a significant change by the tour operator.

“Such a scale should not sacrifice fairness for the sake of simplicity but is not inherently unfair provided that it reflects a genuine pre-estimate of a tour operator’s costs incurred as a result of cancellations as whole.

“The sliding scale also gives certainty at the time of booking about what the costs of a cancellation will be at any time. In their absence, a customer would have no idea what the costs of any cancellation would be until they try to do it.

“In a significant number of cases, including those highlighted by the Daily Telegraph, customers have had to cancel due to illness and any cancellation charge could be claimed under their travel insurance.

“Abta’s consumer advice is very clear, customers should ensure that they have travel insurance at the time of booking.

“Of course we would also always expect our Members to act in a sensitive way when dealing with customers who are suffering illness or bereavement.”

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