British holidaymakers whose summer plans have been ruined by the collapse of a budget tour operator have expressed frustration and anger over their poor treatment and lack of financial protection, as it emerged that they could receive compensation of less than £8 each, reports The Guardian.
Lowcostholidays collapsed into administration last week, leaving 27,000 customers stranded abroad and 110,000 with worthless future bookings, including many for the summer holidays. About 55 per cent of the group’s customers are British.
Consumers lambasted the company on social media. Last Thursday, the day before its collapse, Lowcostholidays had caused a flurry of late bookings by extending a summer sale promising up to 60 per cent off holiday prices.
On review site Trustpilot, one Lowcostholidays customer wrote: “Took our booking at lunchtime Friday, went into administration Friday pm and took money from a holding account Sunday early am!! … What were administrators doing to allow money to be taken after the event?”
Ray James, 62, a mailroom assistant from Sidcup, south-east London, had booked a 10-day holiday to Benalmádena on the Costa del Sol through the operator for himself and his wife, four other adults and five children, flying out in August. “We are over £3,000 out of pocket and we did not find out until Monday night about the company’s collapse – we heard nothing from them,” he said. “This is our first big family holiday for two years and we have saved hard for it. We are distraught.”
Many were angry at receiving a request for feedback about customer satisfaction, following their booking and payment, after the company collapsed. Another customer wrote: “Can’t believe I would be sent a feedback request considering I paid the balance of my holiday and within a couple of hours the company declared it went under! When I sent my payment it should NOT have been accepted and a message sent that the company was closing. Shameful and pitiful.”
In 2013, the Civil Aviation Authority (CAA) highlighted the lack of protection afforded to UK consumers when the company’s millionaire owner, Paul Evans, relocated Lowcostholidays to Spain, pulling the group out of the travel association Abta and the Atol protection scheme. Evans sought legal advice that allowed him to start selling from Mallorca, in line with an EU directive to enable services to be sold across borders.
EasyJet, which had engaged Lowcostholidays to supply hotels for the airline’s holiday arm, ended the contract in March 2015, partly because of concerns over consumer protection following the decision to relocate the business.
On Tuesday, administrators Smith & Williamson confirmed that a bond in place for €1.3m (£1.09m) was enough to pay out only a few pounds to each customer. Expecting “very substantial” claims from about 140,000 aggrieved holidaymakers, the administrators warned that pooled compensation was unlikely to be more than 1%-2% per claimant – potentially less than £10.
Noel Josephides, the chairman of Abta, said: “Evans exploited a loophole that everybody knew existed – he had the best legal advice and he made the step.” Most Spanish tourism is domestic and the bond is far below what an equivalent British company would expect to pay for the volume of travellers. UK operators and agents also pay £2.50 per traveller to the CAA for an air travel trust fund to cover possible business collapse, a levy not imposed in Spain, and are liable to pay VAT on top.
Josephides said the bond showed up “the chinks in the armour of the EU legislation: the way that Spain and the Balearics implemented it was very different, but I don’t suppose they ever thought they would have a big outbound operator like Paul Evans on their hands, or really understand the sort of hit they would get”.
The UK European Consumer Centre (UK ECC) advised those already on holiday to keep all receipts for any expenses related to Lowcostholidays ceasing trading, saying that it might be possible to make a claim via debit or credit card, or an insurer. It said those who have not yet received flight tickets should check with the airline to ensure that they have a booking, and contact their hotel, but that they would probably find that the reservation had not been paid for.
The UK ECC urged those hoping to get their money back via the Visa Chargeback scheme, where they have paid by debit card, to contact their bank and request a chargeback for the amount paid. Those who paid with a credit card may be able to get a refund from their provider. Under section 75 of the 1974 Consumer Credit Act, credit card companies are jointly liable with retailers if something goes wrong, such as a company going into administration.
The UK ECC spokeswoman Jane Negus said: “It’s good that there is an organisation such as the Spanish regulator for travel agencies. However, consumers are not likely to receive all of their money back via this avenue, as there are limited funds available.
“Consumers will also need to pursue other options as well. However, if they are in any doubt, they should contact the UK European Consumer Centre on 01268 886 690 for advice.”
