What to do if you want a refund but the company has gone bust

Countless businesses have been fighting for survival during the economic downturn caused by the pandemic, leaving many customers concerned they may never get their money back on purchases made before the crisis hit. 

Airlines, event organisers and hotels have been among the worst affected and been inundated with refund requests.  

Many have offered vouchers or the chance to rebook at a later date, raising concerns about whether those companies will still be operating and able to honour the credit. 

High street shops have also been pushed to the brink, and many several high-profile businesses have filed for administration, including Debenhams, Cath Kidston and Laura Ashley.

What are your rights to a refund on items, tickets or vouchers if the company goes bust?

If the company has entered administration then an insolvency practitioner is appointed to help the company repay debts.

At that stage it is unlikely that you will get a refund from the company itself, as it will already be unable to pay all its debt.

Even so, you can make a claim by writing to the administrator dealing with the company, which will have taken over from management, detailing how much money you are owed and what it is for. 

Any cash left in the business will first go towards paying the secured creditors and employees, the rest will then be split between everyone who has submitted a claim.

If you’re trying to claim on a cancelled holiday, you can contact your travel insurer to see if you are due a refund under your policy.

However, only about half of travel policies will cover the cost of the tickets and any additional expenses incurred.

Brian Brown, of financial information business Defaqto, said cover for airline failure was an optional add on in around a fifth of all annual travel policies.

Around a third don’t provide this cover at all. Mr Brown said: “Airline failure is not covered as standard on over half of travel insurance policies as the risk is usually relatively small.”

This was the case for customers of airline FlyBe, which entered administration in March, after a government rescue bid fell apart. Passengers were forced to look to their travel insurance or credit card providers if they wanted to get their money back.

If you booked the holiday as part of a package then you will be fully protected through the Air Travel Organisers’ Licensing (Atol) scheme and should not lose out.

The next step after checking insurance policies is to ask your credit card provider for a refund under Section 75 of the Consumer Credit Act.

The section is a legal act that protects you when you spend on your credit card but the value of the ticket or item must be between £100 and £30,000 to make a claim.

If you booked the ticket or bought the item with a debit card you may be able to make a claim using the Chargeback scheme. This gives people a chance of getting their money back from their bank if a service has not been provided.

This will only get you your ticket cost back, and will take time.

Some card providers will need a “negative response letter” confirming the position the customer has been left in.

For those who have vouchers or gift cards, you are not guaranteed to get your money back and should use them as soon as possible if you can.

It is not uncommon for a company to refuse to honour vouchers once it has gone into administration even if money has already been paid for them.

When high street groups go under, the administrators view customers with vouchers and gift cards as creditors. That means that you will have to get in line with all the other creditors and are likely to be at the back of the queue.

Are you trying to get your money back on a purchase you made before coronavirus hit? Tell us in the comments below

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