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Published on Monday, July 20, 2020

Trade welcomes government's backing of refund credit notes but says it's come too late

The industry has welcomed the government's backing of Refund Credit Notes, but many say the move has come far too late.

The government announced on Saturday that it had finally given its backing to RCNs, four months after ABTA first pleaded with ministers to tell consumers they have the same financial protection as package holidays.

Transport minister Grant Shapps confirmed RCNs will be covered by the ATOL scheme, so if a tour operator goes bust, clients left with credit notes will be refunded from the Air Travel Trust Fund.

The ATOL scheme will be extended to cover RCNs issued from 10 March to 30 September for Covid-19-related cancellations.

ABTA said the government's action 'gives reassurance to consumers and supports the travel industry at an especially difficult time'.

Refund credit notes for ATOL packages now have the same financial protection as non-flight-based packages with ABTA bonding, it said.

"The move will particularly help tour operators that have not been able to immediately refund customers for cancelled package holidays because they have had to wait for money back from airlines and other suppliers.

"We now need the government to listen to industry calls for tailored support to protect businesses and jobs until its recovery can properly take effect."

TravelMole understands that RCNs will be valid up to the expiry date of an operator's ATOL, but operators must still offer clients the option of a cash refund instead.

CAA consumer director Paul Smith said consumers 'are entitled to a cash refund and must be offered this option at the same time as a refund credit note or booking amendment'.

Industry reaction

For many, the decision has come several months too late.

One tour operator said: "The industry has already refunded millions of summer holidays, if the government wanted to avoid firms collapsing, they should have done it months ago. This announcement will reassure customers who've already been given credit notes, but it doesn't really help us."

Westoe Travel Director Graeme Brett agrees: "I am relieved that it has been announced but it is far too late," he told TravelMole.

"I am bitterly disappointed that ABTA and the consortia did not put more pressure on the government to announce this earlier.

"We have had so much grief from customers when we needed support to explain the situation.

"If this announcement had been made at the very start, then more people would have accepted the Refund Credit Note and those wanting a refund would have had one processed quicker. The problem now is the delay in getting refunds."

Travel agent Mair Jones, Partner at Bordessa Holidays in West Wales, said: "It's a little too late. The majority of the damage has been done already. People will have made up their minds by now whether they wanted to rebook or get a refund. The government hasn't helped the travel industry at all."

AITO Chairman Chris Rowles said:  "I really do not know whether to laugh or cry. Why oh why has this taken four months? And the next battle looms - what happens after September, when the closed-date window to which they refer (to 30 September) ends?

"They seem to be unaware that the Air Travel Trust rules actually specify that such credit notes are protected; effectively, they don't know their own rules - or are they intending to change them, causing still more ongoing problems?"

Sunvil Chairman Noel Josephides expressed his anger, saying: "Shame on you, one and all in government."

Former ABTA Chairman and ex-Advantage Chief Executive John McEwan said: "It's good news that the government has finally confirmed that RCNs will be ATOL protected. ABTA has always advocated that this is the case but we have had to wait months for confirmation.

"In the intervening period, the industry has lost consumer goodwill through some companies not abiding by the package travel directive, although there have been notable exceptions. It's also created divisiveness within the industry, which has not helped either."

Campaign group Right to Refund's campaign leader Kane Pirie said: "We have been calling for urgent clarification for months from both Department for Transport and the CAA and are pleased a decision has finally been taken.

"The Government has wisely decided to extend ATOL cover to RCNs issued between 10 March and 30 September 2020. Given that an estimated £4 billion have already been issued and remain unredeemed, failure to extend cover would have caused chaos.

"We expect this will prove to be a one-off and customers should note that unusually ATOL cover for these Covid-19 vouchers lapses on 30 September 2021.

"The announcement also in effect clarifies that ATOL protection on RCNs should not be assumed and sets and end-date for the scheme."

ABTA and consumer groups have been pressing the government to confirm that refund credit notes have the same financial protection as holidays since the Foreign Office advised against all non-essential overseas travel in March, prompting millions of holiday cancellations.

While tour operators have been issuing RCNs while waiting for the government to act, consumer groups have been cautioning consumers not to accept them without confirmation that they have the same financial protection as the package holidays.

Rory Boland, Editor of Which? Travel, said: "This move means people can now be confident their money is protected if they decide to support their tour operator by accepting a refund credit note, but it later goes bust. But package travel companies should not use this as an excuse to continue forcing credit notes onto their customers and must make clear when they have the right to a cash refund.

"This is a positive step towards restoring trust in the travel industry. Holiday providers must do right by their customers - and the law - and return any outstanding refunds for cancelled holidays. Otherwise, the regulator must be ready to take strong action against those continuing to flout the law on refunds."

By Linsey McNeill, Editor (UK) and Lisa James, Deputy Editor (UK)

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