Banks across the UK have been blocking billions of pounds worth of refunds for holidays cancelled due to the coronavirus outbreak.
It is estimated that the public is collectively owed around £7 billion from travel firms. Forced instead to turn to their banks for help, many customers have now been told they are not eligible for a refund.
Why aren’t travel firms giving refunds?
Consumer watchdog Which? recently revealed that 20 of the UK’s largest airlines and travel firms are illegally withholding refunds which should be paid to customers within 14 days.
Instead, most customers have been offered vouchers or credit notes, with many complaining that they have been unable to claim a refund online, or get through to customer services on the phone to ask for their money back.
Should I ask my bank for a refund?
Customers who have been refused a refund by travel firms and paid for their trip using a credit card can claim the money back from their provider under Section 74 of the Consumer Rights Act.
Credit card providers are jointly liable with the retailer or trader for any breach of contract for misrepresentation, providing the value is more than £100 and less than £30,000.
However, Which? has warned that some credit card customers have been told by their provider that they're not eligible for a refund through the scheme. Others have been informed that their claim won’t be processed until they have tried to claim the cash from the travel firm first, even though this is not a legal requirement.
Customers are also able to claim through a process known as chargeback, which allows a transaction to be reversed if you are unable to resolve a dispute, including services not delivered.
This covers all card payments and is a process agreed between financial institutions and the relevant card scheme, such as Mastercard and Visa.
What are Mastercard and Visa’s chargeback rights?
Mastercard said there is a chargeback right where firms have cancelled goods or services, even where this is due to government restrictions, insolvency or other exceptional circumstances.
It is also valid if the cardholder doesn’t wish to accept the firm’s offer to rebook or claim a voucher, but the issue should first be attempted to be resolved with the firm.
Visa’s guidance also states that firms should process a refund promptly if customers decline a credit note or voucher, and cardholders do have a right to complain when goods or services are not provided.
However, Visa does make an exception where firms have failed to provide a service due to a government-imposed travel ban, stating that this “supersedes Visa rules on dispute rights”.
For this reason, Mastercard customers are likely to be more successful when making chargeback claims for coronavirus-related cancellations.
If flights are cancelled due to closed borders, customers will still have a dispute right under both Mastercard and Visa, as EU-wide rules around refunds override the government travel ban, according to Which?.
Which banks will refund under Section 75 and chargeback?
Banks have said that they will assess each case individually when it comes to refunds from firms only offering credit notes or rebooking a cancelled trip.
This is what the major banks told Which? about issuing refunds:
Where a provider has not met their legal obligations to the customer, Barclays will consider both chargeback and Section 75 claims, provided the relevant criteria are met.
HSBC, including First Direct and M&S Bank, will allow a chargeback or Section 75 claim to be made for goods or services not received, but customers are encouraged to contact their airline first.
Lloyds Group, including Halifax and Bank of Scotland say that if a refund is not offered by the travel firm and a customer has proof of this, the bank can pursue a disputed transaction claim under scheme rules.
Metro Bank’s position is that every chargeback and dispute is different, and each claim will need to be assessed on a case-by-case basis with the customer to work out the best solution.
Nationwide also says each case will be looked at on a case-by-case basis because it depends on the type of good/services being purchased and what the terms of the agreement are with the merchant.
Similarly, RBS, including Natwest and Ulster Bank, said cases would be considered on an individual basis.
If a claim made with the merchant in the first instance is not satisfactory, customers can contact Santander to raise a claim.
Where the merchant has offered the chance to rebook for free and/or provide vouchers and the customer is not satisfied with this then Starling Bank says it would initiate a chargeback.
If a merchant is not offering a refund, or are asking customers to contact their card issuers to process a refund, Tesco Bank customers can raise a dispute.
The Co-operative Bank says that if customers tried to resolve the issue with the merchant first but there was no refund or resolution, the bank would look at each case individually to verify if a dispute chargeback right existed. If a chargeback right existed but the cardholder accepted a credit voucher, this would not affect the cardholder’s original dispute rights. The bank would also not reject a Section 75 claim outright in these circumstances.
If customers are offered a voucher or a chance to rebook, TSB would typically accept the claims and each case will be considered individually.
If the customer is unhappy with the solution offered by the merchant, Virgin Money would consider the terms and conditions. If the alternative arrangements are not covered, a chargeback would normally be successful. Section 75 claims will be considered on a case-by-case basis.