Concern at the impact of mass claims for consumer refunds has heightened amid warnings that credit card chargebacks could “bring companies down”.

There was still no decision from the Department for Business (BEIS) on suspending the Package Travel Regulations (PTRs) requirement to refund consumers for cancelled bookings within 14 days on Wednesday.

This was despite Abta making a fresh appeal in a letter to ministers on Monday, warning lack of action put businesses “on the brink”.

An industry source said: “There is a concern the decision is drifting and we need to get this across the line.”

Abta met yet again with the Department for Transport (DfT), Department for Business (BEIS) and the CAA on March 26, having warned of “mass failures” and “an industry-wide collapse” if the 14-day rule is followed.

It wants the 14-day window extended to four months, confirmation that refund credits will be protected, an emergency consumer hardship fund to help pay refunds where suppliers won’t, and “strong enforcement” against airlines which refuse refunds.

But the source said: “BEIS is still caught up on the legal issues, the consumer politics and EU politics.

“They get this [refund credit note] regime will deliver refunds more quickly, but are worried about how to explain it to consumers. Abta is following up with officials again and again.”

The source warned that without action, consumers would seek refunds via credit cards, saying: “The chargeback issue will become a serious problem.”

That warning was echoed by Travel Trade Consultancy director Martin Alcock who told an International Travel Law Network video conference: “We might end up where credit card chargebacks are what bring companies down.”

 

What if the government does not act?

Abta, with the CAA, has been urging the DfT and BEIS to act on refunds for more than a fortnight.

It wants BEIS, which oversees the Package Travel Regulations, to allow refund credit notes to replace cash refunds temporarily and the DfT – which oversees the Atol scheme – to confirm the delayed refunds are protected should businesses go bust.

The delay has seen Abta partially take the matter in its own hands, advising members to delay refunds and issue ‘refund credit notes’ both on the bookings it protects and on Atol-protected bookings up to July 31.

Travel Weekly understands the DfT is convinced of the need to act, but ministers and officials at BEIS are not amid concern that delaying refunds “is not good news for consumers” and would contravene EU law.

An industry source said: “They get this [refund credit note] regime will deliver refunds more quickly to people, but are worried about how to explain it to consumers.”

If BEIS does not modify the PTRs, Abta would “have no choice” but to proceed in advising members to delay refunds and provide refund credit notes in their place.

The source insisted: “It has happened anyway, and the CAA and Abta can confirm the refunds are protected under the existing rules.”

However, it is highly unlikely the CAA would confirm the credit notes are protected, since this would involve the regulator condoning a breach of the law. So demands for clarity are unlikely to be met without action by BEIS.

The reality may be agents and operators must accept Abta guidance without government or CAA confirmation.

In the words of an industry source: “People may have to muddle through as they are on a lot of fronts.”