Customers are now guaranteed a refund for cancelled package holidays - even if the travel firm collapses

What you need to know about the announcement from the government (Photo: Shutterstock)

People who accepted credit notes as compensation for cancelled packaged holidays during the coronavirus crisis will be able to get their money back if their travel firm later collapses.

The announcement from the government is a reassurance for travellers that their money won’t be lost if their travel firm goes bust.

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A full refund

Travellers who have had their trips cancelled due to the coronavirus pandemic are entitled to a refund - although most travel companies are offering customers compensation in the form of credit notes, in order to help their cash flow.

These credit notes allow customers to rebook their holidays for another time, or request a refund at a later date. However, there have been doubts about whether these customers are protected by Atol (or Air Travel Organiser's Licence).

The Atol scheme is usually used to stop package holiday customers from being stranded abroad or from losing money from future bookings when operators go bust, like what happened with Thomas Cook in September 2019.

Before this announcement, consumer watchdog Which? had been advising customers to reject credit notes offered to them and instead insist on a refund, due to concerns that the credit notes would become worthless if the issuing firm went out of business.

Protecting customers

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.

"This is not only good news for anyone looking to get away for a break in the sun, but also for the aviation and travel sector which has been hit hard by the pandemic."

The announcement protects refund credit notes issued between 10 March and 30 September 2020 for package holidays which were cancelled because of the Covid-19 pandemic.

‘Much-needed clarity’

The Civil Aviation Authority (CAA) consumer director Paul Smith said, “This news provides much-needed clarity for consumers, who should now feel confident that their money is secure if they have chosen to accept a refund credit note for their cancelled Atol-protected booking.

"While consumers may accept a refund credit note if offered, they are entitled to a cash refund and must be offered this option at the same time as a refund credit note or booking amendment.”

While customers who booked a package holiday that might not go ahead due to the pandemic are entitled to a cash refund within 14 days, thousands have been forced to wait longer to get their money back.