Financial Protection

On this page: Risks | Card payments | ATOL | Trade Associations | Flight problems – EU 261/2004

In these recession hit times, it’s natural to worry that someone in the chain of people that will deliver your holiday, will disappear before you get there.  You could also suffer changes to your holiday arrangements or failure to deliver what’s expected. So lets look at what can go wrong, how worried you should be, and how you can protect yourself.

Risks

The first risk is that something happens to you or a member of your party that prevents you travelling.  I have known someone fall down the stairs the day before their holiday but I’ve also had a client develop cancer well ahead of their holiday who then needed to stay in the UK for treatment.  So it’s important you take out travel insurance as soon as you book your holiday, not the week before you go.

The second risk is you hand over your money to a scammer who has no intention of booking you a holiday and who disappears with your cash. This risk is probably low – not many people book sailing holidays compared to buying, say, electrical goods, so a sailing holiday company or agent is probably not the ideal front for such a scam.  But use your common sense too.

There’s no one way to check a supplier or agent but below are some of the things to look out for.  Not everyone will have them all – joining trade associations costs money.  The one man band operating from a home office (of which I am one)! may have good reason for operating as a sole trader and by not having the overheads and demands of a larger operation may offer better service and a keener price.

• Look at the website – only keen scammers are going to spend hours putting together pages and pages of information to catch a few bookings worth of people’s money
• Look for logo’s of licensing authorities such as ATOL, or trade asociations such as ABTA, BMF, MLA and check them out on the appropriate site. Don’t trust a link from the suppliers site – a good scammer isn’t going to take you to a page that confirms he’s suspect!
• Look out for full contact details – I’m wary if I find PO box numbers or if there’s no postal address at all.
• You can check out Limited Companies on the Companies House database (www.companieshouse.gov.uk/ then select the Webcheck option)
• For Sole Traders, check the electoral role (you can’t see the full address without paying but you can check a person against a street name) and look for other links like Facebook and Linkedin.  Or ask them for a reference (I can give you contacts within and outside the industry who you can check out and who will vouch for me.

So, not a risk that you can eliminate entirely but probably the one I’d lose least sleep over.

The third set of risks is that the airline, the yacht supplier, the tour operator or the agent goes bust.  Of these, the agent is probably the less risky – your contract will be with the tour operator or yacht supplier he’s agenting for.  If he’s a Sole Trader with unlimited liability, his assets are everything he owns; his house, his car etc.

Of the rest, well, yacht supliers do come and go but I’ve been hearing rumours of the imminent demise of a large Greek operator for several years and it hasn’t happened yet (and the rumours vary as to which one it would be)! Airlines do fold but the reality is that there aren’t that many left.  Most remaining UK charter airlines are part of large tour operator groups and it would be interesting to see what the Government would do if one of these went to the wall.  I used to think the prime candidates were the smaller tour operators but the recent cash flow problems at Thomas Cook suggest the big players aren’t necessarily a gold plated certainty.

Fortunately there are means to protect your holiday.  The bad news is, like any form of insurance, there’s a price to pay, either directly or indirectly so you may decide you’d rather just take you chance – after all, for all the headlines, the number of people that come a cropper each year is tiny compared to the number of people travelling. But read on for some notes on what gives you protection (and what doesn’t).

Finally, there’s the risk that your holiday goes ahead, but is marred by problems such as changes and flight delays.  Here it’s hard to generalise as much of what may occur will be covered by terms and conditions that are specific to the booking contract.  However, there is some statutary protection regarding flight delays and denied boarding situations (see below) and there are some commonly occurring booking rules, some of which may surprise you:

• You may not be allowed to board your flight or yacht if you haven’t paid for your holiday in full.  Well what do you expect?!
• With a package, your flight may be retimed by up to 12 hours without any compensation being due.
• On a bareboat or flotilla holiday you may not be allowed to sail if you can’t produce the original copy of your sailing certificate.  It’s amazing how many people forget them.  Would you expect to hire a car without a driving license?!
• You can be forced to take a professional skipper (at your expense) or to disembark, if the yacht supplier or tour operator believes you are unfit to sail the yacht.

As the above hopefully indicates, there are rules you can’t do much about, and some risks you can completely eliminate.

Payment by Credit and Debit Cards

Paying by credit card gives you full protection, paying by debit card gives you none, right?  Wrong!

Under the Consumer Credit Act, Section 75, credit card protection only applies to purchases of over £100 (and less than £30,000).   It makes the card issuer jointly liable for faulty or non delivered goods or services. Which means if the supplier goes bust you can claim from your card company.

The price you pay for this is that most travel companies now charge a surcharge for credit card payments to reflect the processing costs and the fact that they may not see the funds arrive from the credit card companies until many weeks after you pay.  There is a way to reduce the charge though.  The full value of your purchase is protected even if you only pay part of the total by credit card, as long as the card amount is at least £100. So you could pay the holiday deposit by credit card and the rest by debit card or bank transfer.

Paying by debit card is usually surcharge free (Low Cost airlines excepted)! And it is a little known fact that debit card payments also give you protection.  Most UK banks now issue Visa rather than Maestro debit cards.  Visa operate a chargeback scheme though which you can claim back for goods or services that were faulty or not delivered, including for example if an airline goes bust.

This is not a statutary protection but you can refer the matter to the Financial Ombudsman if the case is not settled to your satisfaction. There is no minimum purchase price, unlike the Section 75 protection with credit cards discussed above, and you can claim for associated costs, such as the cost of replacement flights home, though the rules on this revolve around the term “reasonable” and so success rates seem to vary.  The scheme is neither well publicised (I wonder why)! nor it seems particularly well understood by junior bank staff but it does exist and it does work.

ATOL – Air Travel Organisers License including the 2012 reforms

With effect from the end of April 2012, changes have been made to the ATOL scheme which is run by the UK Civil Aviation Authority (CAA). The scheme previously provided protection to many (but not all) package holidays and holiday flight bookings sold in the UK.  Independent arrangements, where flights and accommodation were booked separately, were not covered.

In what could be argued to be another act of political brilliance by our ruling classes, the changes mean that packages will continue to be covered as will some (but not all) independent arrangements involving flights and accommodation.  But flight only bookings are not covered, most charter flight operators having withdrawn ATOL cover in recent times.  The new rules have already been criticised by the Commons Transport Committee but don’t worry, there’s talk of more change to come next year!!

Still, you will now get a Certificate confirming ATOL cover, as opposed to the Statement you were supposed to get (but didn’t always) in the past.  The requirement for these isn’t mandatory until October 2012 however, so you may have to wait until next years holiday to see your first certificate!

The new rules extend cover from packages (essentially acommodation, flights and possibly other services, sold at an inclusive price) to “Flight-Plus” holidays, where you book overseas accommodation or car hire with UK originated travel that includes a flight either to or from the UK (or both). The “Flight-Plus” elements have to be booked with a day either side of each other, from the same company.

You do not have to buy your ATOL protected holiday direct from the ATOL holder – agents are still allowed to sell holidays on behalf of ATOL holders.

So what cover does ATOL provide? Well it should ensure that if the ATOL holder goes bust you will be brought home if abroad, or have your holiday cost refunded if you’ve not yet travelled. If one of the ATOL holder’s suppliers goes bust, you should get a refund or alternative holiday arrangements within the terms of the booking contract (though arguably, you get this anyway, regardless of ATOL).

Given the benefits, why would anyone not book with ATOL cover.  Well, for several reasons:

• ATOL cover isn’t free.  The ATOL holder has to pay a bond of at least £40,000 as well as £2.50 per passenger. They also take on additional risk as they are not guaranteed a full refund themselves if one of their supplies goes under. Though these costs may not be itemised on your holiday invoice, they are recovered through what you pay.
  So the only way a tour operator can make his packages cheaper than you could make them up yourself, is through bulk purchasing.  That’s fine for the big boys, but a limited opportunity for smaller travel companies like…quite a few sailing holiday companies!
• ATOL protection may reduce your choice.  ATOL holders carry some risk if a supplier goes bust and so may limit the suppliers they deal with. This may mean you do not get as many yachts to chose from.  It does not mean there is anything wrong with other suppliers, there is simply a limit to how much time can be spent checking them all out.
• ATOL protection limits where you can buy from.  The cover only applies if the different elements are booked from the same ATOL holder.  So if you find a cheap yacht from one supplier but their flights are more expensive than elsewhere, you will have to pay more than necessary if you want the ATOL protection.

More changes to the regulations are in the air, possibly for 2013, which may bring back full flight only protection.  Meantime, you have a choice of buying an ATOL covered package or Flight-Plus holiday, or self assembling your own “package” which will probably work out cheaper and give you more choice but leaves you with a bit of risk.  How much risk is debateable.  It’s really the same issue as with any insurance – do you take the insurance and maybe end up paying the premium for nothing, or skip the insurance, save the premium and hope no problems arise.

ABTA, AITO, BMF, MLA and other Travel Industry Associations

These organisations are as much geared to assisting their members, the travel companies, as protecting the clients.  In general, they provide codes of conduct and some require their members to financially protect any holidays, including accommodation only sales made under their logo.  But since much of this protection comes from members having ATOL licenses their role is arguably less significant.  They do provide arbitration services in the  event of disputes so they’re in no way a bad thing, and as all require fees from their members they are an indication are serious businesses, not fly-by-nights.

And in case you’re wondering why I’m a member of the British Marine Federation (BMF) but not the Marine Leisure Association (MLA), you have to be a member of the first for a period before you’re allowed to join the second.

Flight Delays and Cancellations – EU Regulation 261/2004

The regulation applies if your flight is cancelled, you are denied boarding (eg because of overbooking) or suffer long delays.  It applies to any fixed wing (ie not helicopter) flight whether by scheduled, charter or low cost airline, if you are travelling;

• From an EU country (or EU country’s territory)
• To an EU country on an airline based in an EU member state
• provided you have a confirmed reservation, checked in on time, and are not on a ticket not available to the general public (eg an airline staff ticket)
• regardless of how the flight was booked, eg separately or part of a package

The rules are fairly complex and probably not something you’d want to learn, but if your flight is cancelled, you are denied boarding or suffer a delay of more than two hours, the airline should give you written notice of the assistance and compensation you are entitled to.

The provisions include compensation, refunds, replacement flights, meals, accommodation and phone calls, but your entitlement depends on the length of your flight, the notice given and the circumstances of the delay or cancellation.