Atol protection to be extended to vouchers on Covid-19 cancellations

Customers who receive vouchers instead of a refund on package holidays cancelled as a result of the coronavirus will get their money back if the tour operator goes out of business, the government has said.

Rules which protect holidays where the flight and hotel are booked together have been extended, in a move the Department for Transport said was designed to boost consumer trust in the travel sector.

Since lockdown began many would-be holidaymakers have had their trips cancelled, and cash-strapped firms have attempted to persuade them to take vouchers and credit notes, rather than full refunds. However, it was unclear what consumers’ legal rights were if they accepted vouchers from a firm that later collapsed.

Customers whose holiday bookings were protected under the Atol scheme will now have that cover extended to vouchers issued between 10 March and 30 September if the cancellation was a result of the pandemic.

The Atol fund is run by the regulator the UK Civil Aviation Authority (CAA) and is funded by travel firms, which pay a fee of £2.50 to protect each passenger booking in case of insolvency. The money is used to refund, repatriate or reimburse travellers for the cost of repaying for the affected parts of their trip.

The transport secretary, Grant Shapps, said: “We want to send a clear message to passengers that they can book their summer holidays with confidence, which is why we’re stepping in to protect refund credit notes issued as a result of Covid-19 cancellations.”

The announcement was welcomed by the CAA, which said it provided much-needed clarity for consumers.

It said that companies were obliged to offer full refunds at the same time as offering vouchers, and that even if a customer took vouchers, they must be allowed to convert them to cash at any point up to 30 September 2021. The extended Atol protection will end on the same day.

Some consumers have complained that travel firms have made it hard to apply for their cash back, or have flatly refused repayments despite being legally obliged to offer them.

Abta, the trade association for tour operators, said the extension of Atol guarantees would support the industry at a difficult time.

A spokesperson said: “This assurance enables consumers to hold and rely on refund credit notes with confidence, before rebooking a much needed holiday.

“The move will particularly help tour operators that have not been able to immediately refund customers for cancelled package holidays because they have had to wait for money back from airlines and other suppliers.”

Martin Lewis, the founder of the Moneysavingexpert website, said: “Taking an Atol credit refund note if you’re likely to rebook shows welcome forbearance and flexibility, and the fact that, if you don’t use it, it can be exchanged for cash gives peace of mind.”

He added: “Of course it’s not right for everyone, many desperately need a refund. My hope is this more solid halfway house for some will enable firms to more swiftly pay out full refunds for others.”

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