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Holiday deposits and cancellation fees - are you being treated fairly?

Posted by: , Posted on: - Categories: Consumer protection

Deck chair and sun umbrella on the beach with red cross over the top

With the summer holidays fast approaching, many of us are getting ready for a break in the sun. But what if the worst happens and you need to cancel your booking? No-one wants to cancel a holiday but if you have to, you shouldn’t lose out more than is necessary.

This blog explains what consumer law means for deposit and cancellation fees, and how you can make sure you’re being treated fairly.

What we mean by ‘fair terms’

Under consumer law, businesses must make sure their terms are fair. If a term is considered unfair by a court,  then it can’t be enforced against the customer even if they have signed up to it. It is particularly worth looking out for unfair terms with deposit and cancellation fees.

Businesses are entitled to ask customers to pay a fee if they cancel – or to keep some of an upfront deposit – to cover their losses. But the amount they keep must be in proportion to what they are actually losing as a result of a cancellation.

Terms and conditions that don’t follow this approach – for example, where the business keeps a large upfront deposit which bears no relation to its losses – are likely to be unfair. As a general rule, deposits should only be a small percentage of the total cost.

In practice this means that if you cancel a booking and a business resells it, you should be entitled to some money back. Travel firms can either use a case-by-case system, where people are refunded if and when a replacement booking is made, or they can have general terms and conditions based on how likely it is that they will be able to resell any cancelled bookings as the date of the booking approaches.

Both approaches can be fair under the law, so long as customers are getting back a reasonable amount.

1 in 5 consumers who experienced cancelling a holiday say that they were treated unfairly
All statistics are provided by Ipsos MORI. UK representative sample of 2,260 adults, Nov 2018.

What you can do if you think a business has treated you unfairly

1. Talk to the business

You are entitled to challenge the business and ask them to justify what a fee covers. Remember, even if you signed or agreed to something, this doesn’t necessarily mean the terms are legally binding if they are not fair under UK law.

2. Contact a consumer advice body

If you think a businesses is keeping more than is fair, you can go to Citizens Advice and get advice from their consumer service on 03454 040506 or 03454 040505 for Welsh language speakers. Consumers in Scotland can call Consumer Advice Scot on 0808 164 6000.

Alternatively, you can report an issue to your local Trading Standards Office. There are also independent companies – some of which offer free assistance - that may be able to help you to resolve your issue.

3. Seek legal advice

If you still feel you’ve been treated unfairly, you have the right to escalate your complaint. Customers can take an issue to the small claims court where the amount at stake is not more than £10,000.

Our role

As the Competition and Markets Authority, we believe that most companies want to do the right thing, but some might struggle to understand the rules on what’s legally fair. Previous research found that less than half of UK businesses know the rules on unfair terms well.

That’s why we’ve been running our “Small print, Big difference” campaign to encourage the holiday and tourism sector and businesses to ‘check in’ on their terms and conditions. We have been working with partners such as ABTA – The Travel Association, UKHospitality and the Specialist Travel Association (AITO) who are helping us spread the message and make sure businesses are being fair with their customers.

Unlike the other government-funded agencies listed above, the CMA isn’t set up to provide advice on your individual issues or complaints. We are responsible for taking wider action to tackle problems that affect consumers as a whole, aiming to improve things for people right across the UK.

If you think you've seen an unfair term that might be a common problem with businesses in a particular sector, or indeed any other unfair or anti-competitive practices, you can draw our attention to it by completing our notification form.

For advice for businesses, visit our fair terms campaign page.

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  1. Comment by alan powell posted on

    If you have paid fully for your foreign holiday and you are over 70 and still self isolating under government advice past the departure date, would the holiday company take this as cancellation and therefore we would lose our money

  2. Comment by geoffrey Tonks posted on

    a tour companies terms and conditions state we will keep your deposit as compensation,and incase we can not resell the holiday, they have used these terms and conditions,all the way through covid 19, they knew they could not resell anything ,excuse you cancelled first not us so were keeping your deposit.

  3. Comment by Mark posted on

    I cancelled a holiday (before covid). The company has kept the whole 10% deposit (£538) despite confirming that their costs were £419 and that some of this has now been refunded. I have taken this through arbitration where the QC found in the holiday companies favour. I thought the reason for cancellation was irrelevant and that the company can only retain their accountable costs? I'm waiting for the CMA to confirm the legal position before I challenge the decision.

  4. Comment by geoffrey Tonks posted on

    CMA it looks like tour companies are taking no notice of your letter they are still flaunting rules and regulations on cancellations and refunds and now it is nearly the end of July,Action please

  5. Comment by Philip Hayward posted on

    How can Travel Agents get away with offering partial refunds, even when they have received the majority of our cash, from Cruise companies and other?
    We were offered about 2 thirds of our money back by the Agent (Jetline Cruises) but now reduced to 1/3, remaining refund amounts in each case on an RCN (Refund Credit Note) end of September. We just need our full refund but they just ignore our wishes and several messages? No point having a rule for refunds within 14 days, our holiday was cancelled in May and still no refund, HELP!

  6. Comment by G Robson posted on

    I reported Jetline Cruises to CMA on May 13 2020. I have received no contact from Jetline regarding my cruise refund since June 16. Cruise cancelled on Feb 16 2020. I am pursuing this through Section 75 with 2 credit card companies.

  7. Comment by Richard Sanders posted on

    I paid for a cruise with P & O on the new ship Iona for two families, trip was for September 2020. Cancelled in March as Covid-19 took affect.
    Contacted Rol Cruise ( Agents) by letter and email to cancel cruise.
    Since then I have written to them 3 times and each times they say we are dealing with this. I was told originally that it may take 90 days, now 100 days and still counting.
    I will now take the matter further.
    DISGUSTED with P & O, I will never use this company again.

  8. Comment by Siobhan Dickson posted on

    I have paid in full for a holiday villa booked through Solmar Villas, this was booked ore covid for May 2020, they agreed to move the holiday to 2021 which was fine but still in the same predicament this year. They are refusing to refund me and the cost for moving it to the same time next year is too expensive. They have told me the villa is there and not cancelled so not breaching their contract. Spain is not permitting entry from UK residents and the UK Government are not permitting residents to travel. In my opinion Solmar cannot provide the service so I should be entitled to a refund.

  9. Comment by Philip Harrison posted on

    Warner holidays cancelled a Xmas holiday due to Covid last year. They haven’t returned the deposit. It’s only £100 but it’s the principle. You can call them on their hot line at 45p/minute but I’ve emailed since 25 Feb and despite promises they’ve done nothing. I think they are just hoping people will give up. Time to raise the anti on social media.


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