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Insight

Cancellations and Refunds in the Time of Covid-19

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United Kingdom

Read latest insight below from our commericial team on how to manage cancellations and refunds in the midst of Covid-19.

CMA Taskforce
Another day and another industry is being investigated by the Competition and Markets Authority ("CMA") for failing to respect consumers' cancellation rights arising as a result of the COVID-19 outbreak.

The CMA set up a COVID-19 Taskforce to monitor breaches of consumer laws during the pandemic and it has created a facility on the CMA website, which allows consumers to report a business behaving unfairly during the COVID-19 outbreak.

What are consumers complaining about?
As lockdown in the UK went into force, businesses were faced with closures and the prospect of unprecedented losses. Consumers' lives were put on hold and had little choice, but to cancel all variety of things, from sending children to nursery to cancelling weddings and every Briton's worst nightmare – cancelling a summer holiday!

Businesses went into protection mode to stay afloat and from the thousands of consumer complaints received by the CMA's COVID-19 Taskforce, it seems that consumers are struggling to obtain refunds and being misled about their statutory consumer rights. 

The CMA found that consumers are being:
  • pressured into accepting vouchers for holiday accommodation, which could only be used in more expensive periods;
  • forced into paying high fees to secure nursery spaces;
  • refused refunds by wedding venue providers and being told to claim on their insurance;
  • offered travel vouchers in place of a refund, where they have the right to a full cash refund;
  • given misleading information about their rights;
  • charged cancellation fees and losing deposits;
  • hindered in trying to assert their rights e.g. by not being able to contact businesses – phone lines cutting off or long wait times.

What action has the CMA taken to date?
Just last week, having received over 17,500 complaints from consumers about package travel companies, the CMA published an open letter (which will also be sent directly to 100 companies) and opened an investigation into failures to comply with refund rights under package travel laws and engaging in unfair commercial practices.

This follows on from an earlier CMA investigation into cancellation policies in the following sectors: holiday accommodation; nursery and childcare providers; and wedding and private events.

The CMA also issued a statement early on at the end of April setting out its position in relation to cancellations and refunds during the outbreak i.e. that in most cases, a full refund should be issued to the consumer if:
  • a business has cancelled a contract without providing the relevant goods or services;
  • a business is prevented from providing services due to restrictions applying during the lockdown; or
  • a consumer cancels or is prevented from receiving services due to restrictions applying during the lockdown.
In terms of action to date, the CMA has already secured undertakings from some holiday accommodation providers to pay out full refunds to customers in relation to bookings that could not go ahead due to Government restrictions. A number of other firms have also voluntarily revised their behaviours to fall in line with the CMA's recommendations.

Complaints about airlines have been passed to the Civil Aviation Authority, which is primarily responsible for apply consumer laws to air travel.


What do you need to know?
The assumption isn't that businesses are intentionally trying to take advantage of consumers and there is an acknowledgement that in these difficult times, businesses are trying to do the right thing. However, in trying to protect themselves, this may not always be implemented in the right way. So if you are faced with consumers requesting cancellations and refunds, you should note the following:
  • consider the reason for the cancellation and whether a consumer has received any goods or services;
  • issue full refunds to consumers who have the right to one;
  • full refunds will also usually apply even if consumers have paid what businesses deem to be non-refundable deposits and advance payments;
  • if the consumer has received some services that they have paid for in advance, your customer would still usually be entitled to a part refund for the services that it has not received;
  • credits, vouchers, re-bookings and re-scheduling are acceptable alternatives to refunds, but they must be fair and clear to consumers;
  • any alternatives offered to consumers must not be forced on consumers and it should be clear that they still have the option to a refund;
  • timings for refunds should be made clear (and must meet any statutory deadlines, such as  those that apply to package holidays);
  • consumers should not be misled about their rights; and
  • consumers should not be hindered or obstructed in pursuing their rights.
The CMA Taskforce continues to receive complaints from consumers and it has made it clear that it will consider other sectors.

Our Advertising & Consumer team regularly advises clients on compliance with consumer laws and fair commercial practices. If you have any questions or require any help in navigating this area, feel free to get in touch with Sonal Patel Oliva or David Bond.

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