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Holiday refund scheme criticised

By Bob Howard
BBC Radio 4's Money Box

XL plane
The leisure group collapsed leaving customers out-of-pocket

Some customers of failed travel company XL who were expecting to be refunded under the ATOL guarantee scheme are being turned away.

The Civil Aviation Authority (CAA), which runs ATOL, says any XL customer who paid on a credit card should go to their credit card company instead.

Credit card companies have an obligation to pay out to customers under section 75 of the Consumer Credit Act.

But consumer body Which? says customers should be compensated by ATOL.

When XL collapsed in September, 85,000 people were stranded abroad and almost 250,000 people expecting to go on holiday were forced to make other arrangements.

When the CAA assured customers it would pay out, John from Edinburgh believed his £500 refund would be straightforward as his travel agent was ATOL-protected.

But despite submitting his documents twice, he has still not been paid.

In a clear-cut case like this when an airline has failed, there should be no delay
John, XL customer

ATOL said its policy from the start has been not to pay out to anyone who paid the full cost of their holiday on a credit card - as John had done - and it had told customers this.

Customers like John were expected instead to have claimed the money back from the credit card company.

But John told BBC Radio 4's Money Box programme he thought one of the main reasons for ATOL's existence was to pay out in these cases.

He said: "In a clear-cut case like this when an airline has failed, there should be no delay.

"They should have all the procedures in place ready to refund customers' money."

John's credit card company is obliged to refund him under Section 75 of the Consumer Credit Act, which gives a bank a shared responsibility with the supplier for any breach of contract for goods or services paid for on a credit card.

Frustrated

ATOL has now been advised by its lawyers that credit card companies are also liable for the full cost of a holiday, even if only the deposit had been paid on a credit card.

Mark from Bognor paid his deposit on a credit card for a holiday he planned to take to Florida in October.

He is frustrated at the change in policy: "I don't see how ATOL can side-step it like this because that's the whole point for people booking ATOL-protected holidays."

Mark and John's concerns are shared by the consumer organization Which?.

Monica Jaimini, a lawyer for Which?'s legal service, said ATOL should not be offloading claims: "If someone has ATOL protection, then they should be complying with their obligations under that and making payments accordingly."

The CAA admitted that what it called the "unprecedented scale of XL's failure" has had an effect on its ability to deal with claims.

It insists it is paying out most claims and so far has refunded £15m.



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SEE ALSO
Thousands stranded by XL collapse
12 Sep 08 |  Business

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