personal finance

Smooth landing for holiday refund dispute

Covid-19 cancellations have cost millions of families dearly. They have been refused cash from holiday companies and airlines. They have been denied compensation from travel insurers. Many have battled for months with credit card companies to receive compensation under section 75 of the Consumer Credit Act 1974.

For evidence of this, look no further than last week’s announcement by the Competition and Markets Authority that it had secured agreement from Virgin Holidays to refund customers for holidays cancelled because of coronavirus, amounting to £203m in repayments. The CMA said it received hundreds of complaints from customers not receiving refunds or being told they had to wait 120 days for the money back.

As well as the CMA, the Financial Ombudsman Service has become an option for frustrated consumers. It has had an upsurge in complaints about credit cards failing to pay compensation for cancelled holidays and concerts.

However, it is possible for customers seeking redress to go it alone by making a Money Claim Online — an internet-based service offered by HM Courts and Tribunals to allow you to claim money you think you are owed by an organisation or person — whether travel companies, builders or online retailers.

One FT reader, the chairman of a stockbroking firm, decided to do this when his £18,400 Club Med skiing holiday was cancelled. He and 11 members of his family had booked to go skiing in April 2020. He was offered vouchers to book an equivalent holiday but they had to be used by the end of 2020.

He was initially referred to customer services. It replied saying that Abta, the travel association, advised holiday companies to provide vouchers, and that cash refunds were not their priority at that time. He rightly pointed out that if a package holiday was cancelled, a refund should be provided for the whole holiday within 14 days.

He decided to issue proceedings against Club Med by making a Money Claim Online to the civil court using the N1 form on the Ministry of Justice website. He paid a fee of £830, which was 4.5 per cent of his claim.

“It was very easy and very efficient,” he said. “I had sent a ‘without prejudice’ email on April 19 saying I would be issuing proceedings after I received an email from Club Med stating: ‘Unfortunately, refund is not an option due to the severe impact that is causing the Covid-19 outbreak on all the travel industry.’”

He said he probably would not have made a court claim against a small travel business that could not afford to pay a refund, but Club Med is owned by Fosun, a multibillion-pound company.

He asked Club Med for a cash refund under the Package Travel and Linked Arrangement 2008 regulations, but was told: “At this stage Club Med is issuing only credit to all Club Med membership accounts. This credit will be valid until December 31 2020 to rebook a holiday.” The holiday would have to be taken before April 2021.

Credit conundrum

Different family members had made bookings for the ski trip at different times using his American Express credit card. So, before taking court action he had asked Amex for a refund under the Consumer Credit Act. He made claims for each of the bookings, totalling £18,400. On May 21 Amex rejected the first of these because a voucher had been issued by Club Med.

It said Club Med had provided the refund credit note, which meant no refund was due. He assumed that all the other section 75 claims for individual bookings would be rejected, since vouchers had been offered for each. Amex noted that he could refer his complaint to the Financial Ombudsman Service within the following six months. 

But he decided to make the court claim. “I assumed the [credit card claims] would all be rejected, although two credits to my account had been made, without my knowing. I issued proceedings against Club Med on May 23. I was prepared to risk the fee as I knew I had a good case.” He claimed for the full £18,400 costs plus the £830 court application fee.

The travel company had 14 days to acknowledge the proceedings and to file a defence. He then gave his response.

“It was straightforward. I did not need a solicitor,” he said. Club Med agreed a settlement on July 28 and paid on August 7, including court fees.

He added: “The moral is clear: do not hesitate to both threaten and take legal action especially if the amount is under £10,000, as you don’t have any risk of costs awarded against you. Yes, you do risk losing the court fees but if you are confident in your position it’s worth taking the risk.”

To make a claim, you need to establish that you have a genuine grievance and financial loss and that the other party has the means to pay. 

Costs to pursue a case online start at £25. For paper-based claims it is £35 for claims up to £300. The fees rise in line with the claim size, up to 5 per cent of a claim for £100,000 to £200,000. You may also be able to claim back the fees if you win the case, but a judge may refuse to award costs if he or she thinks you have made no effort to agree out of court. Most plaintiffs put their own case forward.

For claims under £10,000 in England and Wales you will be asked to use the small claims mediation service. The limit in Scotland is £5,000 and in Northern Ireland it is £3,000.

Claims surge

Estelle Giraudeau, UK managing director at Club Med, said the business was receiving an “unprecedented level of inquiries”.

“We are currently processing all requested refunds by chronological order and are committed to refunding within a maximum of 60 days,” she said. “Wherever possible, we are trying to process these faster. We are kindly asking our customers to be patient and bear with us as we work through the bookings, but we are making progress and beginning to catch up.”

Amex said it could not comment on the specific case but said in a statement: “We would like to assure all our card members that our process is to review all refund claims carefully and fairly, on a case-by-case basis. At any point during this process, if a card member receives a refund from the merchant, we will take this into consideration.”

The Financial Ombudsman Service handles complaints from credit card customers who have not been able to get compensation from the card company under Section 75 of the Consumer Credit Act 1974. Credit card companies are jointly responsible with the retailer or trader for goods or services that have not been supplied.

Grounded planes at the start of the coronavirus lockdown in March © Getty Images

So far, the service has had more than 300 complaints about Section 75 and chargeback claims that are related to Covid-19. 

Martyn James of Resolver, the free online complaints service, said more complaints were arising where refunds were declined as vouchers were on offer.

This was often compounded by the group nature of bookings, he added. “If lots of people book for a collective holiday but pay separately, they have separate claims and this can produce different results depending on the card provider.”

Lindsay Cook is the co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor to look into, email


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