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There was some excitement earlier this week (mid April 2019) following a story on the BBC News website about “unenforceable deposit and payment demands” in the event of cancellation by the customer. There seemed to be a belief that there had been a change in the law regarding the amounts that holiday (and cruise) companies could hang on to in the event of a late cancellation because of unforeseeable and significant personal events – that is, the amounts usually referred to as ‘cancellation charges’. There was even a belief expressed that the “new regulations” meant that companies could no longer hang onto money at all, but had to refund all payments made in the event of a customer cancelling.

Unfortunately – it’s not that simple. I’ve done some research and this is what I’ve found:-

  • the story on the BBC News website was a report on comments made by a senior official from the Competition and Markets Authority (CMA);
  • the CMA was actually launching a campaign, in conjunction with the travel industry, to “help holiday and travel businesses improve the clarity of their terms and conditions”. The campaign is calling on businesses in the industry to ensure that they are using fair terms and conditions in their customer contracts. They say that businesses need to be “upfront and clear with their customers about charges and fees, especially in the event of a customer cancellation”. The campaign is not calling for any change in the law.

So new laws or regulations, I’m afraid – the comments are a restatement of the existing position i.e. that while companies can say whatever they like in their terms and conditions, those Ts&Cs have got to be fair. If they aren’t, they may not be enforceable. The problem, of course, is that the only way to test whether Ts&Cs are fair is via the courts, and that’s always likely to be more expensive than the amount at risk.

There’s a lot in the press release from the CMA that covers what the public regard as “fair”. For example, 89% (of what? – I don’t know) feel that they should get their money back if the travel provider is able to re-sell the holiday; and 85% (again, I don’t know what of) feel that it’s unfair if they have to pay part of the cost of booking if they have to cancel. I have a feeling that some readers have picked up on parts of these comments, e.g. “customers should get their money back if they cancel”, and have formed the view that this is how it is now. It isn’t.

Just for fun (!) I read through the P&O Ts&Cs regarding cancellation. First, paragraph 38 of their Ts&Cs reads as follows:-

The Guest has the right to cancel the Contract prior to commencement of the Package without paying any cancellation charge in the event of unavoidable and extraordinary circumstances significantly affecting the performance of the Contract. In such circumstances the Guest shall be entitled to a full refund of all monies paid, but shall not be entitled to additional compensation.

So if you experience “unavoidable and extraordinary circumstances” you should get back all the money you’ve paid. Unfortunately, there’s no definition of those circumstances. To be fair, there probably can’t be. If there were, there would be pressure for them to be extended to cover similar but non-included situations. Additionally, it would be easy for P&O staff to simply refer to the list and apply it in a heavy-handed way, whereas with the circumstances undefined, each case can be considered on its merits.

But if there aren’t such circumstances, cancellation charges will apply. These are split into two:-

  • if you have booked either a Select or an Early Saver fare then the following cancellation charges apply:-
    • for cancellations up to 91 days before departure: the deposit that’s already been paid;
    • 90 days to 57 days before departure: 50% of the total price;
    • 56 to 42 days before departure: 60% of the total price;
    • 41 to 17 days before departure: 75% of the total price;
    • 15 to 6 days before departure: 90% of the total price; and
    • less than 6 days before departure: 100% of the total price.
  • If you have booked a Saver fare, then the cancellation charge is 100%.

I believe that for Select and Early Saver fares, full payment must have happened by 90 days before departure at the latest, while for Saver fares full payment is taken at the time of booking.

Are these charges fair, legally speaking? I don’t know. Certainly there doesn’t seem to be any reference to reselling the cruise or holiday in there. Suppose (after 90 days) the charge was the difference between what you’d paid and the amount it was resold for, plus an admin fee? If the actual resale price was 75% of the price you’d agreed, then you’d get back 75% of what you’d paid instead of lesser amounts (plus an admin fee). That might be seen as more fair, but also more opaque – you’d be relying on the cruise line to resell the cruise for the best price possible, you’d have to accept their word for the eventual resale price (if there was one), if they weren’t able to resell it you’d have to accept that they had tried to resell it, and so on. At least with the present position you know where you stand – and because it’s clear, that might be regraded as “fair”. But there again, these charges only apply where there are no “unavoidable and extraordinary circumstances”; if you take into account the fact that P&O will refund all of your money if those circumstances apply, then perhaps their cancellation charge provisions could be regarded as fair overall.

This is certainly a tricky situation. As customers, we will always place our own circumstances as the most important factors to be considered. The cruise line, of course, will place its operational and financial requirements further up the list than we would. Striking the balance between those two perspectives will never be easy.

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