Why are banks blocking lost holiday repayments?
Lenders are stalling on refunds as tourists are owed £7bn for cancelled trips
Disappointed holidaymakers, trying to get their money back for trips disrupted by the coronavirus pandemic, are having their refund applications blocked by banks and credit card operators.
Tourists are currently owed an estimated £7 billion for unused holidays and flights but travel operators are offering credit notes or deferred bookings instead.
However, many customers are unwilling to accept either offer because they fear that the notes will be worthless if the companies go bust, or because they cannot travel at a later date.
The Times says that tourists and the travel industry both want the government to step in to guarantee the notes but ministers have failed to act.
Therefore, thousands of travellers have turned to their banks and card operators, who are legally obliged under Section 75 of the Consumer Credit Act, to refund eligible customers.
Customers who booked their holidays or flights on a credit card can legally claim back the cost from their bank if the cancellation constitutes a breach of contract.
But some are being told that they are either not eligible or that they must exhaust all avenues with their travel company first, which is not required in law.
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Some banks are also blocking their customers from making “chargeback” claims.
Customers of several lenders, including Halifax, Metro Bank and RBS, say that they have been told they are not eligible because they have been offered credit notes. This approach contradicts the guidance issued by Visa and Mastercard.
Amid anger over the stalling tactics, the Financial Ombudsman Service, which adjudicates on complaints between banks and their customers, said: “We recognise this is an unprecedented situation but there is no reason not to process these claims as usual.”
Banking bosses say that the issues are “cock up rather than conspiracy” but Gareth Shaw, of Which?, said: “There needs to be greater clarity and consistency about claiming through banks, and the industry should ensure that all customers have a fair chance of getting their money back.”
Last week, Which? accused UK travel operators of breaking the law by refusing to pay out in 14 days. It suggested “extending the processing deadline to 28 days” and for any vouchers to be “guaranteed against insolvency and eventually redeemable for cash”.