Lowcostholidays collapses – your rights as 140,000 hit by travel chaos

Lowcosttravelgroup administrator Smith & Williamson says those affected include 27,000 people who were already abroad when the news was announced last Friday, and a further 110,000 who had booked but not yet travelled.

Thousands of you who've lost out have asked us if you can reclaim the money from the firm, which was based in Spain. Many are weighing up whether they can afford to rebook accommodation even though there's no guarantee they'll get back what they'd already paid – the Spanish regulator now says those reclaiming via it may get as little as £7 per person.

Update 29 September 2016: Since we published this guide we've had dozens of reclaim success stories using the tips below – see for full details.

'A really difficult and tricky situation – what your options are'

Before we get into specifics, watch MoneySavingExpert.com founder Martin Lewis's short summary of the situation and what you can do.

I've booked with Lowcostholidays but not travelled yet – what can I do?

The collapse affects anyone who has booked with the Lowcosttravelgroup Ltd, or its Lowcostholidays Spain, Hoteling.com and Lowcostbeds.com A.G. brands – technically known as 'subsidiaries'. Some people have discovered that holidays they bought on Lastminute.com are actually booked with Lowcostholidays, so they're also affected.

Here's step-by-step help on what to try if your holiday's been hit:

Step 1: Check your flight and hotel bookings urgently

If you booked with any of these brands, you need to check the status of your booking with your airline, hotel, transfer and airport parking companies ASAP.

• Your flight rights. The administrator says bookings should still stand in most cases, as payment is usually made to airlines at the time you book so they hold your reservation. However not all flights have been paid for, leaving some without transport. if you haven't received your flight confirmation details, check with the airline directly.

• Your hotel and other rights. In most cases, hotel reservations and any other services booked through the travel agent, such as transfers, WON'T have been paid for. That's because hotels are typically paid by sites like Lowcostholidays around 30 days after your stay.

  If it's not been paid, your hotel may hold your reservation until you pay it, or it may just cancel your booking – which is why it's vital to check before you travel. If your hotel says your booking is valid and has been paid for, make sure you get it in writing.

Step 2: If your hotel's not paid for, decide if you can really afford to go

While many flight bookings should still be honoured, it's those with hotel bookings who'll be hit hardest – leaving many with a difficult decision to make.

Martin says: "The truth is, if your hotel hasn't been paid then you're going to have to decide whether you're willing to pay it. While we're going to explain ways that you may be able get your money back below, those methods are not guaranteed, so the safest thing to do is plan on the assumption that you may have to pay twice.

"Therefore you really have to work out whether you can afford to go under those circumstances, or whether, if you've got the flights, you may be able to find a cheaper form of accommodation. Doing that does not affect your ability to ask for the money back as below.

"If you can't afford to go to the destination, you may also want to speak to the airline company and see if it's possible to change or move your flights. You generally don't have a right to do that, but you can ask them to be sympathetic. The same goes for your hotel."

See our Cheap Hotels guide for help rebooking. According to the Financial Ombudsman Service, if you rebook at a more expensive price you're unlikely to be able to reclaim the difference under the Section 75 scheme (explained in more detail below).

If you've flights booked but your hotel's been cancelled and you don't want to pay again, you may want to cancel the whole holiday. If so, you can try asking the airline if it'll let you cancel your tickets, but many aren't refundable. Ryanair says it won't refund any tickets for Lowcostholidays customers in this situation – Monarch and Emirates, who also worked with Lowcostholidays, haven't yet told us what they're doing, but we'll update this story when we hear more.

If you do cancel your tickets your airline may still refund some of the tax you paid on them if you request this – but they're not legally required to do this.

Step 3: See if you're covered by your card provider or PayPal

You may be able to reclaim from your credit or debit card company or from PayPal if you paid using one of those methods – though it depends on what exactly you booked:

• Credit card payments. If your booking cost £100 or more (even if you put just 1p of it on a credit card), under Section 75 of the Consumer Credit Act, credit card firms are jointly liable with retailers if something goes wrong – such as a firm going bust – meaning you may be able to get a refund from the card provider.

  You can use our template letter to file a claim with your credit card provider – see our Section 75 guide for more info.

  Martin says: "Section 75 has a strong chance of working. Yet it's important to understand that for it to work there must be a direct link between the product paid for and the debt. If there is an intermediary or agent, that link can be broken which invalidates Section 75.

  "So the question is, was Lowcostholidays an agent? My thought, backed up from guidance from the Financial Ombudsman, is that Section 75 should work if you got a flight and hotel together, as then this was a Lowcostholidays package, rather than it being an agent's. But if you just used it to buy your hotel through it, it probably was an agent.

  "However, whenever there's a complexity like this credit card companies tend to reject claims hoping you will go away. So be prepared for that rejection and don't think that's it. If they reject you, make sure you GO TO THE FREE FINANCIAL OMBUDSMAN Service, which will give you a full impartial adjudication."

  While Section 75 is more powerful, Visa, Mastercard and Amex credit cards also have 'chargeback' protection (explained below). It may be worth using chargeback to claim as well, as some banks let you do both. If you want to do this, check with your bank to see if they'll let you.

• Debit card payments. If you paid on a debit card, Section 75 doesn't apply, but you may be able to claim on the chargeback scheme, where they get your cash back from the retailer's bank if something goes wrong. This is not a legal requirement, it's a customer service promise, though it's worth trying.

  Update 29 September 2016: Initially the Financial Ombudsman Service told us you usually have to make a chargeback claim within 120 days of the holiday start date. It later said this time limit varies between card types. If you paid using a Visa card you must claim within 120 days of becoming aware your booking (or parts of it) wouldn't be provided. However there's an extra deadline to keep in mind - you must also claim within 540 days of the date you paid Lowcostholidays. If you paid on a Mastercard, the deadline for making a claim is 120 days after the date the holiday was due to start.

  HSBC, RBS, Barclays, Halifax and Lloyds have confirmed they will offer the chargeback scheme to Lowcostholidays customers. Even if you're able to put in a claim, its success is not guaranteed. See our Chargeback guide for more help.

  We're now starting to hear of success stories using chargeback to reclaim.

• PayPal. If you paid by PayPal, you're covered by its buyer protection scheme – but only if you raise a dispute within 180 days of paying. A spokesperson told us: "Purchasers of holidays from Lowcostholidays paid for with PayPal are indeed covered under PayPal buyer protection. They have 180 days from the date of payment to open a dispute relating to the payment."

• Bank transfer or other payments. Sadly if you paid via bank transfer or another method, eg, cash, you won't be able to try any of these routes – but read on for other options.

Step 4: Check if you're covered by your travel insurance, though it's unlikely

If you're out of pocket then it's worth checking if you're able to make a claim on your travel insurance. Check your policy and if unsure give your insurer a call.

However, be warned that many policies won't cover you for the collapse of a travel company unless you've bought specific travel firm failure cover.

If you can claim, ensure you keep any receipts and paperwork to speed up the process.

Those hit include 27,000 already abroad, and a further 110,000 who have booked but not yet travelled

Step 5: Claim from the Spanish regulator if you booked a flight + hotel

Lowcostholidays didn't have an Air Travel Organiser's Licence (ATOL), because in 2013 it moved its business to Spain.

Under the UK Civil Aviation Authority's ATOL protection scheme, if you book a flight with accommodation and/or car hire, or in some cases a flight on its own, with a UK travel firm, if the firm that organises your travel goes bust you can continue your holiday if abroad or get a refund if still in the UK. However, this protection DOESN'T apply in this case.

However, if you booked both a flight and hotel you can try to reclaim from Govern de les Illes Balears, the Spanish local authority which regulated Lowcostholidays. To do so, you need to email info.lchspain@caib.es stating how much you're claiming and providing details such as your passport number and evidence of your Lowcostholidays booking – for full English-language instructions see the regulator's website.

But, according to info published on the website, Lowcostholidays has a "limited warranty", with just €1.2 million (around £1 million at current exchange rates) set aside to compensate customers who booked both flights and accommodation.

Divided between all 140,000 affected customers, this would amount to a paltry £7 per booking. MSE understands only customers of the Lowcostholidays brand can claim, but even then, this doesn't leave much in the pot to cover losses worth £1,000s in some cases.

Step 6: Register as a creditor with the administrator

You may be able to register as a creditor with Smith & Williamson by emailing lowcosttravelspain@smith.williamson.co.uk.

An administrator's job is to divide what is left of a collapsed company between those owed money. Sadly, from our experience, customers tend to get left with very little from this process – often just a few pence in the pound. But give it a go.

I'm already on holiday and have been left in the lurch – what do I do?

If you're already overseas on a holiday booked with Lowcostholidays, again how you're affected depends on what you booked:

• Your return flight rights. You should have your flight tickets which remain valid, according to the administrator, so there should be no problem with your return flight.

• Your hotel and other rights. You may be asked by your hotel, or any transfer or car parking companies you've used, to pay them locally – even if you've already paid Lowcostholidays for them. Unfortunately they've every right to do this – that's because, as we've said above, hotels are typically paid by sites like Lowcostholidays around 30 days AFTER your stay. Keep receipts in case you can claim back in due course.

Once you're back, see if you're able to reclaim for what you've lost following the steps above.

'I got back £1,400 in five days using chargeback'

MoneySaver Victoria, who paid for her holiday with a Visa debit card, got in touch to tell us about her chargeback success. She emailed: "Just received £1,400 from my Lowcostholidays booking after sending off MSE's chargeback template letter. Our bank TSB paid in just five days, now we're by the pool in Kefalonia. Can't thank you enough." You can read Victoria's full story here.

She's not the only one, either. Karen emailed us to say: "We've just arrived back from Gran Canaria. While we were there we had to pay for accommodation and transfers again – we were so upset. My friend sent me the link to your video. After watching it I rang my bank, and they are going to refund the money in three working days. I can't thank you enough – you are amazing. Keep up the good work."

Another Lowcostholidays customer told us: "I have put a claim in with PayPal and they have assured me that I will get the full amount back after 10 days if no response from Lowcostholidays".

Let us know if you've been able to reclaim successfully – and how you did it – by emailing news@moneysavingexpert.com.

'Absolutely fuming'

Others haven't been so lucky. Since we first reported Lowcostholidays' collapse we've been inundated with emails, comments, tweets and forum posts from thousands of affected holidaymakers.

• Neil told us he'd paid £2,000 to the firm for a trip to Majorca in August, so he and his family could join a friend's wedding celebrations. He found out his hotel hadn't been paid for, and now it's asking him to pay "extortionate" last-minute rates, instead of the price he paid originally.

  The airport transfer he'd booked was cancelled, so he lost even more money. Neil says he's now selling the family's caravan so they can still afford to go on this trip.

• Another family told us they'd lost £1,000 after having to rebook hotels and transfers for their trip to the US. Their insurance company has told them their policy doesn't cover them for this loss.

• Jon emailed us to say: "We were already on a plane to Dubai when they announced they had gone into administration so could do nothing to prepare, arrived at the hotel to find they hadn't paid them and the walk-in rate for the same room would be £6,000. Absolute nightmare."

• Katie told us she was "disgusted" because the firm's collapse means half her family and friends will no longer be able to attend her wedding.

@lewcommins tweeted: "Malia, cancelled without money back because @lowcostholsie have gone bust, absolutely fuming".

@AhhDeeNo added: "I'm going away next Friday with #lowcostholidays, anyone know what's gonna happen? #bust"

What the administrator says

A statement from Smith & Williamson says: "The failure will affect many customers who have purchased flights or holidays, some of whom are on holiday in resorts and some of whom have not travelled as yet. All flights as regards those currently in resorts have been paid for and hence customers will be able to fly home when their holidays are over.

"There are approximately 27,000 customers currently in resorts and 110,000 customers who have booked travel/holidays through the group who have not travelled as yet.

"Unfortunately, as regards customers who have not travelled as yet a small number will have problems as regards their flights not having been paid for, and many will have problems as regards their hotel rooms not having been paid for."