Abta will issue guidance on refunding consumers for cancelled bookings on Monday amid widespread fears the demands for cash repayments will trigger multiple failures.

The association is hoping for a decision from government by Monday to relax the Package Travel Regulations (PTRs) requirement to repay consumers within 14 days.

But Abta will issue its own guidance if there is no official go-ahead because of the urgency.

This will include instructions to agents and tour operators not to issue ‘vouchers’ in place of cash refunds but a ‘refund credit note’ clearly linked to an Atol-protected booking.

Abta and the CAA met representatives of the Departments for Transport (DfT) and Business (BEIS) yesterday (March 19) to discuss urgent changes to the rules.

No immediate decision from government was expected and Abta fears there may be no decision until next week.

An industry source confirmed: “Abta will be putting out guidance anyway by Monday.”

The PTRs specify customers be refunded within 14 days of cancellation, but the sector has been overwhelmed by coronavirus travel restrictions, especially after the Foreign Office advised against all overseas travel on Tuesday.

The source said: “Everyone understands the issues for the industry.” The government “is deciding how to support it [Abta’s request]”.

“The DfT is persuaded, including on the consumer merit, and the CAA is on side.

“People are not going to see refunds anyway [if firms go bust] and they will not get refunds any quicker than through credit notes. The kitty is empty after Thomas Cook.

“But there is no feedback on the possible timing.”

The source said Abta “can address the difference between a refund and a voucher.

“The minute you turn a refund into voucher, a gift voucher, the Air Travel Trust will not refund it. But a ‘refund credit note’ associated with an Atol booking will be protected.”

Whatever is done “has to work legally” for the ATT fund which pays out when an Atol-holder fails.

The issue with ‘vouchers’ is what happens if the business which ‘refunded’ the holiday payment with a voucher goes bust before the consumer receives the outstanding payment or takes the holiday.

Vouchers are not covered by the PTRs/Atol Regulations so not financially protected.

Abta noted yesterday that the EC is now encouraging customers to accept credit notes for a future holiday in place of a full refund within 14 days, hailing it as “an extremely positive step”..

However, the source noted: “This is helpful bit it changes nothing in the legal sense. It does nothing to change the [Package Travel] Directive.

“It says the customer should have a refund or a voucher for a holiday to continue and that should be protected. There is no regulatory change.”

UK government officials are now considering options for a work-around of the regulations, including temporarily changing the PTRs or making clear the regulations will not be enforced.

The source noted: “It’s difficult for politicians to suspend a consumer protection. But this is a necessity. Businesses are going to go bust.”