Independent operators have accused he Financial Conduct Authority of “misleading” consumers about their rights over cancellations when Foreign Office travel advice changes.

The FCA is failing to tell customers who book their holiday as a package with an operator that they always have the right to cancel at any time, Aito claims.

Consumers can claim the operator’s cancellation fee via their travel insurance if the FCO advises against all but essential travel.

Many consumers will prefer to do this rather than wait for the operator to cancel – which new regulations have made a “difficult and uncertain” process, Aito argues.

The issue has been highlighted with the FCO recently advising against all but essential travel to Spain at just five hours’ notice, and more travel advisories anticipated in the wake of spikes in infection at some holiday destinations.

Aito chairman Chris Rowles said: “We seek urgent amendments to the FCA’s currently incorrect advice – on its website and as explained to helpline callers.

“The rules are complex, but government bodies such as the FCA simply have to get things right.

“With FCO travel advice changing frequently and without warning, as we have just seen for Spain, the regulators must take care to communicate clearly to consumers how they are affected and the steps that they can take.”

Aito director Noel Josephides added: “The recent FCO advice on the Canaries and the Balearics is a case in point, bearing in mind that that FCO advice carries no regulatory force and does not oblige organisers to cancel.

“Although the FCO advice triggers travel insurance cover, it does not prevent the travel services in the package from being delivered.

“The organiser has to look at the facts on the ground for that. The Spanish islands – by the UK government’s own admission – represent a low risk for Covid-19.

 German customers are still travelling to the islands, for example.  So it is hard for organisers, faced with these new regulations, to conclude that they are prevented from providing holidays to the islands.

“Certainly the traveller cannot cancel without paying a cancellation fee, because the operator can deliver the package booked.

“Equally, the client would not be able to claim a full refund from the operator. Customers would, however, be able to claim on their insurance if it included cover for cancellation on FCO advice.

“The FCA needs to spell that out.”

Aito believes that insurance claims for a refund of cancellation costs have been routinely referred back to the operator by insurance companies without a second thought.

Josephides said: “From the travel industry’s perspective, insurers have become all too expert at deflecting valid claims; that simply has to stop. Some insurers actually tell their policyholders that they must not cancel – totally denying their rights as consumers.

“Many of our customers recognise that their tour operator has done a great deal of work for them, and that there has to be some acceptance on their part of the cost involved. The regulations completely support that.

“The obvious next step is for the consumer to purchase an insurance policy that offers cover if the FCO issues advice against non-essential travel.

“The consumer can then cancel and claim, if he or she wishes, immediately any such FCO advice is published.  The whole issue is clear-cut for the consumer – simple, quick, reliable, and totally under the consumer’s control.

“The FCA has an absolute responsibility to remind insurers of this key point.”

Josephides added: “We believe that decent travel insurance policies should all include cover in respect of FCO advice against non-essential travel.

“That way lies protection for travellers and for tour operators, who both currently suffer unfairly and unnecessarily in cases such as the recent last-minute change to FCO advice on travel to Spain and the short-notice introduction of quarantine on return to the UK.”

The recently-introduced Package Travel Regulations added a new right of cancellation by the traveller and modified how cancellation by the organiser is regulated.

This new consumer right to cancel applies to any reason for cancellation, and is subject only to the termination fee that the organiser is permitted to charge. The regulations control the termination fee, ensuring that it is fair.

No termination fee can be charged to the consumer if the holiday, including travel to get there, is prevented by “unavoidable and extraordinary circumstances” in or near the places visited during the holiday.

But the fee can be charged if the traveller cancels because of circumstances in the UK, for example, or in a region wider than the particular holiday destination itself, Aito asserts.

The PTRs greatly scaled back how cancellation by the organiser is regulated to give more power to the consumer.

While organisers can still cancel for any reason and rely on the underlying booking contract, the new PTRs provide only an option that organisers may adopt in deciding to cancel a holiday – for example, due to lack of numbers on a group tour, or if they are completely prevented from running the holiday by extraordinary circumstances.

While the regulations make this option available to the organiser, the organiser may choose not to make use of it. Instead, it may rely on cancellation provisions in the underlying booking contract, which remain valid.