CIT0071
Written evidence submitted by Right to Refund
THE GREAT REFUNDS ROBBERY
Submission by Right To Refund being a lobbying group championing over 26,000 consumers who are upset / angry about delayed refunds.
We believe ABTA are wrong and 12 months is too long. A simple 6 months grace period as per car MOTs is a fairer, safer and simpler solution.
That will see customers refunded more quickly and more travel companies survive than under the ABTA scheme.
Campaign led by Kane Pirie who is also Managing Director of VIVID Travel, a tour operator who has complied with the PTRs. Kane was previously on the Board of ABTA.
CONTENTS
ATOL
Air Travel Organiser's Licence: Government run financial protection scheme covering package holidays including flights. The ATOL scheme offers financial protection to customers in the event of business failure.
RCN
Refund Credit Note: A scheme advocated by ABTA wherein customers are given a Refund Credit Note (RCN) instead of a reimbursement of all monies paid within 14 days as required by the PTRs. The RCN can then be used towards a future holiday with that provider or redeemed for money at a date specified on the RCN. This date may be as far away as 12 months after issue date, which in itself would be after the cancellation date. ABTA are advising that RCNs will hold full ATOL protection, however the CAA have so far refused to confirm this.
PTRs
Package Travel Regulations 2018: Statutory regulation implementing the Package Travel Directive (PTD) and obligating package organisers in several important ways to ensure strong financial protection is in place for customers.
TOUR OPERATOR
The Package Organiser (defined term within the PTRs); colloquially a tour operator, who sells the customer a holiday directly or via a travel agent.
TRAVEL AGENT
Generally, sells a range of holiday packages that have been put together by a tour operator. Confusingly many travel agents sell both a. packages that they have created in their own name as a Package Organiser and b. packages that have been created by other tour operators as an agent for those tour operators.
TIME I
Tour operators have up to 12 months from the date of issue of the RCN to make an actual refund, as in reimbursement to a customer. For many people, when they will receive a refund is key. Some people are in financial distress right now and unable to make ends meet. Plus money has a time value for everyone. Having to wait until 2021 is not legal or ethical
TIME II
ABTA argue that their scheme is better as customers will be paid more quickly than if the business fails and they need to claim on ATOL. This is not true. The CAA / ATT normally refund quite efficiently and within a few months of receiving a claim.
CLARITY
ABTA’s position is unclear. Do they want their members to offer RCNs as an option as well as a real refund or instead of? They have made contradictory statements on this. Some customers have been told by ABTA that a RCN is a refund. TUI, a large ABTA member, are not giving their customers the clear option of a real refund / on a timely basis. If ABTA are really opposed to this behaviour, then why have they not acted to stop it?
TRUST
ABTA argue that their members do not have the money available, so cannot pay. If that is the case, why don’t they raise the money? There are some great Government schemes on offer.
Further, TUI recently received an €1.8 billion loan. Loveholidays and Audley Travel are both owned by 3i, who have circa £4.5 billion worth of assets under management. Virgin Holidays are ultimately owned by Richard Branson who has circa £4.5 billion of assets under management. Why don't these wealthy shareholders put some money back into their businesses, like many smaller tour operators have, including VIVID Travel and Attraction Tickets Direct.
ABTA argue that unless the Great Refund Robbery is given the green light by Government, many companies will fail and the tax payer will pay anyway, so basically hand over the money! We believe some companies will fail this year, like every year, Thomas Cook was quite a big name to fail in 2019, for example. We believe that ABTA’s reckless approach in lending their once respectable brand to travel companies denying customers their lawful refunds on a timely basis is shattering consumer confidence in ABTA, their members, the industry in general and the strong financial protection system for air packages: ATOL.
As a result of the COVID-19 pandemic, on the 17th March 2020 the UK Government's Foreign & Commonwealth Office (FCO) advised against all but essential travel to every country in the world.
According to the PTRs, customers whose package holidays have been cancelled by their package organiser are due a full refund within 14 days of cancellation. Despite this, the majority of package organisers (tour operators) have not refunded within 14 days and many are not offering cash refunds at all.
ABTA, a trade association representing many tour operators and travel agents, issued guidance to its members explaining how to offer customers RCNs instead of a refund on a timely basis. Simultaneously ABTA asked the Government to change the law such that package organisers could choose to issue RCNs instead of a refund. To date, there is in fact no evidence of Government enthusiasm towards changing the law
CAA
Civil Aviation Authority: Responsible for the regulation of aviation safety in the UK & also administers the ATOL scheme.
ATT
Air Travel Trust Fund: The Air Travel Trust Fund is the primary source of funding when an ATOL holders fails.
CMA
Competition and Markets Authority: A market regulator which works to promote competition for the benefit of consumers.
RIGHT TO REFUND
Consumer campaign championing the customer's right to a refund as clearly defined within the PTRs. Led by Kane Pirie, also the Managing Director of VIVID Travel, a high-end bespoke tour operator.
ABTA
A large trade association with over 1,200 members. ABTA represent many tour operators and travel agents.
WHICH?
Which? is an independent, high-profile and esteemed consumer watchdog with the stated aim of 'making customers as powerful as the organisations they deal with everyday'.
17TH MARCH 2020
FCO advises against all but essential travel worldwide. PTR refund deadlines kick in.
23RD MARCH 2020
ABTA removes any deadlines from its Code of Conduct whilst lobbying the government for a change to the PTRs. ABTA publishes guidance to members on how to issue Refund Credit Notes and is reported to be advocating a move to RCNs as an alternative to refunds. Crucially at this time, RCNs are promoted as being redeemable no later than 31st July 2020.
26TH MARCH 2020
Kane Pirie issues first in a series of statements to the trade press urging industry peers to follow the law as it stands and suggesting that the government consider a 6 months grace period as they did for car MOTs. This in effect remains the campaign position.
6TH APRIL 2020
Recognising that the appeal to the industry was failing, Kane Pirie launches Right to Refund as a consumer campaign and issues a letter entitled 'It's Right to Refund - Stop Dangerous Changes to the PTRs' which is sent to all MPs and key industry contacts.
7TH APRIL 2020
Kane Pirie launches Right to Refund petition.
9TH APRIL 2020
In order to affect a unified lobbying position to government, a second Open Letter from It's Right to Refund is sent, confirming we can support a grace period which ends earlier, on the 31st July 2020, as advocated by ABTA at that time. Which? offer advice to consumers on refund issue.
11TH APRIL 2020
Following the unexpected move by ABTA away from a grace period ending on 31st July 2020 and to RCNs running on into 2021, Right to Refund submits Second Open Letter: Our Line in the Sand advocating a grace period ending on the 31st July.
15TH APRIL 2020
Former Thomas Cook CEO, Harriet Green, backs Right to Refund Campaign
22ND APRIL 2020
Kane Pirie resigns VIVID Travel from ABTA. Which? revisit issue focusing on multi-national companies and publish list of travel companies issuing refunds.
24TH APRIL 2020
Right to Refund lawyers Kingsley Napley write to Grant Shapps highlighting key considerations germane to the PTRs.
27TH APRIL 2020
Right to Refund write to ABTA, asking ABTA to reconsider position.
28TH APRIL 2020
Right to Refund purchase the cancelled holiday/ refund owed to TUI customer and request repayment through lawyers Osborne Clarke.
30TH APRIL 2020
CMA release statement confirming that they expect companies to still offer refunds in relation to cancellations caused by COVID-19. Right to Refund send second letter to ABTA suggesting refund deadline as per PTRs be reinstated in their Code of Conduct.
1ST MAY 2020
Right to Refund send formal complaint to CMA regarding ABTA conduct.
4TH MAY 2020
TUI refund outstanding debt pursued by Right to Refund
Definition as per The Package Travel and Linked Travel Arrangements Regulations 2018
(5) In these Regulations, subject to paragraph (6), a “package” means a combination of at least two different types of travel services for the purpose of the same trip or holiday, if
(a)those services are combined by one trader, including at the request of, or in accordance with, the selection of the traveller, before a single contract on all services is concluded; or
(b)those services are
(i)purchased from a single point of sale and selected before the traveller agrees to pay,
(ii)offered, sold or charged at an inclusive or total price, (iii)advertised or sold under the term “package” or under a similar term,
(iv)combined after the conclusion of a contract by which a trader entitles the traveller to choose among a selection of different types of travel services, or
(v)purchased from separate traders through linked online booking processes where—(aa)the traveller’s name, payment details and e-mail address are transmitted from the trader with whom the first contract is concluded to another trader or traders, and
(bb)a contract with the latter trader or traders is concluded at the latest 24 hours after the confirmation of the booking of the first travel service, irrespective of whether the traveller concludes separate contracts with one or more travel service providers in respect of the services.
Definition as per The Package Travel and Linked Travel Arrangements Regulations 2018
“travel service” means—
(a)the carriage of passengers;
(b)the provision of accommodation which is not intrinsically part of the carriage of passengers and is not for residential purposes;(c) the rental of—
(i)cars;
(ii)other motor vehicles within the meaning of Article 3(11) of Directive 2007/46/EC of the European Parliament and of the Council establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles (2); or
(iii)motorcycles requiring a Category A driving licence in accordance with point (c) of Article 4(3) of Directive 2006/126/EC of the European Parliament and of the Council on driving licences (3);
RIGHT TO REFUND/COMSUMER POSITION
Right to Refund has from the outset argued for a grace period of up to 6 months to allow travel companies to raise funds and effect the refunds due. Right to Refund initially supported ABTA's redemption date of 31st July, however remained doubtful of ABTA's claim that the RCNs were ATOL protected; in the absence of confirmation from the CAA.
When ABTA moved to advocating RCNs not redeemable for up to 12 months from the date of issue, Right to Refund highlighted this was far too long. Right to Refund continues to advocate a grace period of up to 6 months ending on the 17th September 2020.
As a point of detail, Right to Refund is agnostic as to whether the grace period runs to ABTA's original date of 31st July 2020 or for 6 months through to 17th September 2020. We see that as a less important detail.
ABTA POSITION
ABTA's initial position was that members should issue Refund Credit Notes (RCNs) redeemable up until 31st July 2020.
However, surprisingly, this was extended out, with the tour operator free to select and specify a redemption date up to 12 months from the date of issue. This is critical as it would follow that some customers will be denied their refunds until well into 2021. RTR views this as unnecessarily greedy and far too long for customers, many of whom are in financial distress.
Moreover, the CAA are, seemingly, unprepared to confirm that RCNs issued in this way are ATOL protected. This uncertainty created a material risk for customers. ABTA do not have the authority to make such a confirmation on behalf of the CAA.
FINANCIAL DISTRESS
Most people push the boat out for their holiday. It follows that whether the refund due is £100 or £100,000 the timing of the refund is likely to be important to the consumer. Travel companies are not the only parties adversely impacted by the necessary steps Government has taken to control COVID-19.
Many customers are less affluent due to loss of employment income, business failures and reduced investment income. This means some customers are desperate for their refund and very angry about any delay.
RISK
All RCNs issued in circumstances where the customer is not offered a cash refund within 14 days are unlawful, therefore their ATOL status is unclear. If the package organiser fails will the CAA pay out?
LOSS OF TRUST
Customers trusted their travel company, often selected in part because of the ABTA badge. What are they to make of the chaos, ongoing for weeks, in which their travel company refuses to pay them the money that they are legally entitled to? Customers are further confused as their travel company seeks to explain their conduct by reference to ABTA guidance / statements?
There is a risk consumers lose confidence in travel companies, ABTA and indeed the Government with adverse consequences for all of those parties
LIMITED USAGE
A RCN can only be used to buy from the same shop. Many customers do not want to spend their money on a holiday right now, including Mr Shapps. Being tied into only one shop, with no control over the pricing offered creates another issue with complaints already being voiced about high pricing in 2021.
PLAYING FAIR
Travel companies that have refunded have depleted their cash reserves, and in many cases the reserves of their owners, to effect those refunds. This gives the "good guys" less money to spend going forwards than "the cheats" which puts them at an unfair commercial disadvantage in all arenas including recruitment / retention / marketing etc. Further, lawful companies will need to build the fair cost of the product into their pricing including the risks of refunding. Cheating companies do not and can therefore undercut on price.
OPTIONS FOR THE CURRENT CRISIS
Travel companies continue to withhold refunds & legal action picks up
This is an ideal compromise and has the backing of over 26,000 consumers through the online petition. Six months is ample time for companies to raise funds and process refunds.
Some customers won't see refunds for over a year whilst uncertainty persists around the financial protection of CRNs.
Bad news all round. Travel companies will rejoice but many will fail in 2021 when the CRNs must be repaid. Customers will test all legal options outraged at a retrospective change in the law that disadvantages them.
REFORM TO PREVENT THE NEXT CRISIS
Gold standard 100% funded trust accounts. See letter to the CAA from VIVID Travel.
Payments to airlines pre-flight reduced to deposit only and up to a maximum of [20%]. All flights should have ATOL protection.
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