Holiday firms warned over unfair deposit rules

Travel companies have been warned against unfairly penalising customers who are forced to cancel holidays due to unforeseen circumstances, such as ill-health or death in the family.

In a new campaign launched today, the Competition and Markets Authority (CMA) is urging holiday and travel companies to check that their terms and conditions in consumer contracts are fair, particularly when it comes to forfeiting deposits.

"Under consumer law, businesses may be entitled to ask customers to pay a cancellation fee to cover their losses, but the amount they keep must be in proportion to what they are losing," it said.

"Cancellation terms that don’t follow this approach are likely to be unfair and businesses can’t rely on them to resolve claims or disputes with customers."

The ‘Small Print, Big Difference’ campaign is being run in partnership with leading travel trade associations, including ABTA, AITO and UKHospitality.

The CMA said examples of unfair terms can include those which allow a business to take a large, upfront deposit and refuse to refund any of the customer’s money if they cancel, regardless of the amount the business is losing or the reason for the customer cancelling.

"Another example is when a business insists on a large cancellation fee which bears no relation to the actual losses it experiences from the cancellation," it added.

"A term is more likely to be fair if it clearly explains how a charge reflects what a business will genuinely lose from a cancellation, and the way this charge is calculated is reasonable."

Paul Latham, the CMA’s Director of Strategy and Communications, said: "Nobody wants to cancel a trip or holiday, but if you have to, it’s important that you are treated fairly and don’t lose out more than is absolutely necessary.

"Our campaign is asking travel businesses to ‘check in’ on their terms to make sure they’re fair. Fair terms are a legal requirement as well as helping reassure customers that they’re dealing with a company they can trust.

"Unfair terms can’t be enforced so they also won’t protect businesses if challenged. The small print really can make a big difference."

ABTA chief executive Mark Tanzer said: "ABTA has discussed its model terms and conditions with the CMA, and along with the ABTA Code of Conduct, I am confident they provide our members with a strong framework to ensure they are compliant with the regulations and are fair for customers.

"There are circumstances when a cancellation charge may apply, but it must genuinely reflect the costs of cancellations faced by the travel company. We always encourage people to take out travel insurance as soon as they book their holiday, which should protect them from the costs for most cancellations."

UKHospitality chief executive Kate Nicholls said: "The CMA’s campaign has followed legislation aimed at providing crucial accuracy and transparency for both businesses and customers.

"It is vitally important that our customers have full confidence when they make a booking with a hotel, a restaurant, a B&B or any other hospitality business.

"A clear understanding of terms and conditions can help foster an open and responsive relationship that gives our customers peace of mind and boosts businesses."

AITO chairman Derek Moore welcomed the CMA campaign, adding: "With the myriad of travel organisers, many from outside the UK and EU, targeting UK consumers, understandable and transparent conditions have never been more important."

The Civil Aviation Authority is currently conducting is own review of airline terms and conditions. A spokesman said: "We welcome the CMA’s campaign to tackle unfair terms and conditions in the travel industry. We have taken action against a number of businesses for breaches of consumer protection law, which include offences such as applying hidden charges.

"We are determined that consumers are able to make informed choices based on access to clear and concise information provided by airlines, tour operators and travel agents. We are currently carrying out our own review of the transparency of the terms and conditions used by airlines and will publish our findings in the coming weeks."