Long-awaited regulatory guidance offers clarity over Refund Credit Notes protection

Long-awaited regulatory guidance offers clarity over Refund Credit Notes protection

Move ends months of uncertainty for travel businesses and consumers

Refund credit notes for cancelled package holidays are Atol protected, the Department for Transport (DfT) confirmed on Friday, ending months of uncertainty for travel businesses and consumers.

The Civil Aviation Authority (CAA) immediately followed the DfT announcement by issuing guidance to the industry and consumers on refund credit notes which mirrors guidance travel association Abta issued in April.

It’s understood the guidance has been drafted for weeks.

In a statement, the CAA said: “This news will provide clarity to consumers concerned as to whether their money would be secure if they chose to accept a refund credit note from their travel company following a cancellation of their Atol-protected booking.”

Millions of holidays have been cancelled since the lock-down in travel due to Covid-19 began in March, placing huge financial stress on travel firms to refund consumers.

The Package Travel Regulations require refunds for cancelled holidays to be paid in 14 days, a requirement that, if adhered to amid wholesale cancellations, would have put most firms out of business.

But the difficulty of refunding so many customers was exacerbated by the suspension of airline refunds to tour operators and travel agents.

The CAA confirmed that: “To ensure consumers that hold Atol-protected bookings retain financial protection, refund credit notes issued in respect of these bookings will benefit from Atol protection up until 30 September 2021.

“If the consumer chooses a refund credit note, they should have the option to convert it to a cash refund at any point and must do so before 30 September 2021.”

CAA consumer director Paul Smith said: “This news provides much-needed clarity for consumers, who should now feel confident their money is secure if they have chosen to accept a refund credit note.”

Smith noted: “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.

“We have contacted Atol holders to advise them of their responsibilities.”

The CAA confirmed that refund credit notes should:

Be issued by the Atol holder named on the Atol certificate;

Not exceed the value of payments made towards the Atol-protected booking;

Be directly linked to an Atol-protected booking, either shown on the refund credit note directly or in supporting documents;

Make clear the total value that will benefit from Atol protection, excluding payments made separate to the Atol-protected booking or any incentives offered by the travel company;

Make clear the refund credit note is not transferrable to another individual;

Be clear that it can be exchanged with the travel company for cash at any time and no later than September 30, 2021 if not redeemed against a booking.

These requirements mirror those set out by Abta in its guidance on issuing refund credit notes issued in April.

The CAA noted important exceptions to the insolvency protection commitment, also in line with Abta’s previous guidance.

Atol protection will not apply to:

Refund credit notes issued to consumers for any value originally paid to the Atol holder by a method of payment not covered by the Air Travel Trust’s payment policy e.g. by a voucher that was issued as compensation;

Vouchers issued separate to the Atol-protected booking e.g. incentive vouchers offered along with a refund credit note or any extras booked separately to the Atol-protected booking;

Refund credit notes issued after September 30, 2021, unless they have been redeemed against an Atol-protected booking;

Bookings purchased using a refund credit note where the booking would not ordinarily benefit from Atol-protection, e.g. an accommodation-only booking.

Atol protection will also not apply currently to refund credit notes issued before March 10 or after September 30 this year.

The CAA advises consumers to keep all the original documentation for their Atol-protected booking, including the original Atol certificate, proof of payment and booking documents.

It advises consumers concerned that a refund credit note they have received does not meet the Atol-protection criteria to contact their travel company.