A chargeback on your credit card may be your best bet for a refund when it comes to ruined travel plans.
The collapse of Thomas Cook, which left hundreds of thousands of holidaymakers stranded, highlighted the issue of travel insurance. Travellers may not be aware of the limits around travel insurance which has exclusions depending on the circumstances under which the trip was cancelled.
Claiming on travel insurance
Most travel cover does not protect against cancelled services and not all policies include cover for travel supplier insolvencies.
Jason Veitch, head of Travel Insurance at TIC says that “there will never be a policy that will assist a policyholder absolutely. Sometimes the risks are not affordable or just not quantifiable.”
When you book a flight or accommodation with your credit card, you receive free travel insurance. However, this insurance focuses primarily on health or injury-related issues. It does not cover you if the flights or accommodation are cancelled by the provider. This is according to Cilliers Kriel, CEO of FNB Credit Card.
“Our customers are however covered for cancellations if it is necessary for them to cancel their journey prior to departure as a result of unforeseen and unexpected circumstances such as sudden death, illness or injury of themselves, their travel companion, immediate family or a business associate. Customers are also covered If the scheduled departure of their transport is delayed for at least six hours, due to any fortuitous cause outside their control. ”
Even if you have paid for top-up cover, your protection will be limited. According to the terms and conditions in TIC contracts, comprehensive cover may include a claim for a missed connection and a limited amount (specified in your policy) if the travel supplier becomes insolvent. However, it does not include the insolvency of a travel agent or tour operator or if the loss is recoverable from other legal means.
Refund via your credit card
Your best bet when a supplier cancels a flight or goes insolvent is to institute a chargeback through your credit card. A chargeback forms part of the credit card company’s rules and is an option that can be used by the bank to remedy a disputed card transaction. This could apply in a liquidation situation like Thomas Cook or where an airlines cancels flights, such as the CemAir debacle in December 2018 when flights were grounded. Many disgruntled customers are still waiting for their refunds.
Cowyk Fox, Managing Executive: Everyday Banking at Absa explains that should merchants not deliver goods and services as promised, the customer can claim a chargeback.
“In essence, a chargeback prevents customers from suffering financial loss and engaging in lengthy disputes with merchants. The bank takes care of this within a clearly defined process. Generally speaking, where a merchant has not delivered a service or product paid for by a card, there would be a chargeback right which can be processed to the merchant’s acquiring bank. Typically, chargebacks are applicable from the point at which the service was to be delivered or the point of liquidation.”
Fox says customers who may have been affected by Thomas Cook or its affiliates can email firstname.lastname@example.org to assist with the chargeback process.
Cilliers Kriel, CEO of FNB Credit Card advises customers to log a card dispute with their bank accompanied by all relevant supporting documentation.
“The bank will then assess the claim and determine if the claim satisfies the requirements for recovery through a chargeback process. It is important that a customer immediately notifies the bank of the disputed transaction in order to improve the chances of recovering funds as the dispute and chargeback process is governed by specific timelines from the transaction date, depending on the nature of the transaction. As there are several chargeback options accompanied by different rules determined by the different card associations, it is recommended that customers share as much detail as possible with the bank when logging the dispute.”
FNB offers customers the ability to log dispute claims using the FNB banking app to assist with processing the claims quicker.
No protection for South African package holidays
Most of the travelers who booked through Thomas Cook were protected by Air Travel Organiser’s Licence (ATOL). It provides financial protection on most, but not all, air package holidays sold by travel agents/businesses. Jason Veitch says this only applies to the UK market and South Africa does not have anything like ATOL in place.
“The travel insurance community is limited in its ability to provide cover of this sort because of the size of the risk. Not all travellers purchase travel insurance which makes it impossible to create a risk pool big enough to cover substantial losses. The travel insurance industry in South Africa is approximately R500 million per annum and the losses incurred by Thomas Cook will exceed R4.5 billion. The South African market does not really have organisations as large as Thomas Cook so therefore in fairness, if we had an ATOL it would not need to be as well funded. However, if each of the 2.5 million international travellers were to contribute R40 a ticket then over a 10-year period the fund could raise close to R1 billion which would cover the largest of losses.
This article first appeared in City Press.