MSE News

Holiday firms warned over unfair cancellation charges

Travel firms have been warned against forcing travellers to pay large non-refundable deposits, or charging hefty cancellation fees, by the competition watchdog. 

Holidaymakers who have to cancel their trips, for example because of illness or death in the family, can often be hit with hefty charges.

But while businesses are allowed to charge cancellation fees to cover their losses, the Competition and Markets Authority (CMA) has warned that disproportionately high charges are likely to be unfair to consumers – and won't be legally binding under consumer law.

It's urged holiday firms to check their terms and conditions to make sure they're being fair to customers.

See our Holiday Rights guide for more info on your rights when booking a holiday, and check our Overseas Travel Tips if you're planning a trip.

What are the rules around cancellation fees?

According to the Consumer Rights Act, firms must make sure their terms are fair, and don't give the business an unfair advantage over the consumer.

If the terms are considered unfair under the law, the consumer can't be forced to abide by them. For a holiday firm, unfair terms would include:

  • Disproportionately high cancellation fees. Any cancellation charges should reflect how much money the business is actually losing from the cancellation. If the fee isn't in proportion to its losses, it's likely to be considered unfair.

  • Large, non-refundable deposits. Again, the amount of money withheld through a deposit should be in proportion to how much the business is losing. If a firm takes a large, upfront deposit and refuses to refund any of it regardless of how much it's losing or why the customer cancelled, this is likely to be seen as unfair.

I've been hit with an unfair fee – what can I do?

If you think you've been charged a disproportionately high cancellation fee or had a deposit withheld unfairly, you should first complain to the firm itself.

If you're unhappy with the response from the firm, check how to escalate your complaint. If the firm is a member of an alternative dispute resolution scheme, it should have directed you to this. Alternatively, check if the firm is a member of an association such as ABTA and see if you can escalate to it.

You can also contact Trading Standards via Citizens Advice.

Unfortunately, if this doesn't work your only option may be to challenge the unfair term through the courts. Speak to Citizens Advice to get guidance on your individual situation.

What does the CMA say?

Paul Latham, director of strategy and communications at the CMA, said: "Nobody wants to cancel a trip or holiday, but if you have to, it's important that you are treated fairly and don't lose out more than is absolutely necessary.

"Our campaign is asking travel businesses to 'check in' on their terms to make sure they're fair. Fair terms are a legal requirement as well as helping reassure customers that they're dealing with a company they can trust.

"Unfair terms can't be enforced so they also won't protect businesses if challenged. The small print really can make a big difference."

MSE weekly email

FREE weekly MoneySaving email

For all the latest deals, guides and loopholes simply sign up today – it's spam-free!