CMA consumer watchdog threatens legal action over refund refusals

UK: UK government department and consumer watchdog, The Competition and Markets Authority [ CMA ], has threatened legal action against firms who fail to provide refunds to those affected by cancellations of holidays and weddings due to the coronavirus outbreak.

The CMA claimed that 80 per cent of the complaints it had received since the domestic lockdown began in March were related to cancellations and refunds. In some cases, it said holidaymakers had been pressurised to accept vouchers rather than refunds on their booked accommodation, while some wedding venues have also faced a backlash over their refusal to offer any refunds.

According to the authority, the vouchers offered for cancelled holidays were at times only redeemable during peak seasons, when the prices became more expensive, leaving consumers were left with little or no choice on how to proceed.

Consumer law states that full refunds must be offered if a business cancels a contract without providing any of the promised goods or services. By extension, it also applies if no service is provided due to restrictions resulting of the current lockdown, or if a guest cancels because of said restrictions.

The legal threat has been posed to UK holiday accommodation and private event providers, whereas the issue of cancelled flights is a matter that is regulated separately by the Civil Aviation Authority.

Speaking to the BBC, Which? consumer rights expert, Adam French, welcomed the actions of the CMA: “We’ve heard from many distressed people who risk being left out of pocket for significant sums of money as they struggle to get refunds for cancelled weddings, private events, or holiday accommodation.

“It’s right the CMA investigates sectors that are skirting their legal responsibilities on refunds and cancellations by trying to rely on unfair and unenforceable terms and conditions. The regulator must be prepared to step in and take strong action against any businesses found to be breaching consumer law and taking advantage of consumers during these unprecedented times.”

A number of travel companies, both in the UK and worldwide, have made headlines in recent weeks after their refund policies prompted a backlash from consumers who had seen their holidays and accommodations cancelled due to the coronavirus.

At the start of April, Airbnb CEO Brian Chesky recorded an impromptu video call in which he tried to soothe tensions with the company’s host community and suppliers for abruptly cancelling bookings in March with little or no notice.

In response, Airbnb extended its extenuating circumstances policy to offer full refunds to guests for any trips taking place on or before 31 May, as long as they were booked prior to 14 March. He also announced Airbnb would be paying out $250 million in cancellations back to hosts and laying on a $10 million Super Host relief fund.

This week, American property management company TurnKey Vacation Rentals was reported to have been facing a class action lawsuit over its refund policy, which is similar to that offered by Vrbo in that it guarantees credits returned to the guest for use at the same rental property within the next 18 months. TurnKey’s policy is designed to ensure that the various homeowners on their platform have future business protections.

Domestically, holiday rental cottage companies including Sykes Holiday Cottages and Hoseasons have faced criticism in the national media over claims they were not providing full refunds as the option was not listed in their contracts.

Martin Lewis, founder of MoneySavingExpert.com, said: “Let’s hope this is the game-changer. Many firms are fighting tooth and nail to not give monetary refunds – whether it’s holiday firms like Hoseasons and Sykes, wedding providers and airlines like Ryanair. And sadly, in some of those areas, contractually there are grey areas, leaving things at an impasse.

“These CMA guidelines effectively say it doesn’t matter what’s in the contract – if you’re not delivering the goods or service to customers, they have rights, and they should be given a full refund.

“However, while this is welcome guidance, often even when rights are clear-cut consumers have no way of enforcing them, other than starting court action – which is in no one’s best interest. How can you force a firm to give you a refund when it simply says no regardless of the law? Ultimately, enforcement action is likely to be needed,” he added.