Last week, Low Cost Holidays went into administration, leaving around 140,000 people in limbo with their travel plans.
For most people, there have so far been no clear answers on whether their holiday has been booked and paid for, and now it has been revealed that the company only set aside €1.3 million as a bond with the Spanish authorities – meaning customers will only be refunded approximately £7.50 each.
Low Cost Holidays moved its base from the UK to Spain in 2013, which means that holidays booked with the provider aren’t ATOL protected.
The problem then arises as they initially claimed that they only acted as agents unless they were selling a clearly defined main brand package holiday; in other words, they claimed that they equipped you with the tools to build your package separately.
Many of these so-called DIY Holidays have led to much challenge and debate as to rights, but when the company moved to Spain, they openly stated that they would comply with the Package Travel Regulations.
However, the ‘claim’ of DIY persists and this means for many customers they’ve ‘discovered’ that they have only booked and paid for flights; leaving hotels, transfers and other costs until a later date.
If you booked your holiday using a credit card, you could try to claim a full refund through your credit card provider. Even if you only paid the deposit on the credit card, you can claim back the full amount of your holiday from the provider – as long as the amount you put on the credit card was at least £100.
However, previous experience in similar collapses revealed that credit card companies sometimes fail to pay up or reject a claim on the basis that a compensation scheme is in place. If you encounter this, then use the complaints process with your credit card supplier to try and reverse their decision!
You might also be able to claim back your holiday with your travel insurance. Not all policies pay out for financial failure of the travel agent, so you’ll need to check the terms and conditions of your cover, but this may be another option.
If you added supplier ‘failure’ protection to your travel insurance then you should get your money back.
Registering as a Creditor:
As a customer of Low Cost Holidays, you are in essence a creditor. Whatever your options when trying to get your money back, you should register as a creditor. It is unclear from the current temporary website whether you are registering your claim as a creditor or as a beneficiary of the Financial Protection scheme in place; you need to make sure that you do both!
Do not be fobbed off; insist that you are registered as both a creditor and a beneficiary of any separate Financial Protection Scheme. You may not receive a great financial benefit, but registering as a creditor obligates the Administrator to report to you and invite you to creditor meetings and it will serve to ensure that you maximize financial benefit.
Consumer Financial Protection:
Serious questions need to be asked of the size of the bond held with the local authorities in Mallorca. Anyone who does have a booking should be covered by the EU Package Travel Directive of 1990, where Article 7 states that any retailer should provide evidence of security for “the refund of money paid over and for the repatriation of the consumer in the event of insolvency.”
But why was only €1.3million set aside by Low Cost Holidays for the bond, and how was this permitted? Have the Spanish authorities done enough stress testing on the systems in place to make sure this sort of thing doesn’t happen, and have they failed in their duty to protect consumers in this instance?
It is important to set out what Consumers believed they were getting when they booked a holiday with this company.
On their website, on the Consumer Protection page, they stated:
“Book with Confidence on lowcostholidays
You can have confidence when travelling with lowcostholidays.com. We have been successfully trading for 10 years. We are proud to say that we have 2 million happy customers every year! And those customers can continue to book with us safe in the knowledge that we have full financial protection arrangements as required by European law.
We are established in Spain. Spain, just as the UK does, has financial protection requirements for travel companies. We comply fully with those financial protection requirements. We are licensed with registration no. AVBAL636 and as part of the provision of financial protection arrangements, we have provided a Surety Insurance.
A translation of the licence reveals that it is simply a licence for them to operate their business on Majorca. There is no detailed information for Consumers, but they can be forgiven for thinking that their holiday was fully protected. Unfortunately, we cannot access their terms and conditions as they have been taken offline, so there may well be some limitations expressed in the T’s&C’s.
From that description, Consumers could be forgiven for believing that their holidays were fully protected financially. It leads to the overriding question; how did the country responsible for making sure that financial protection was in place, ensure that this was the case?
It is clear that a company, with a reported annual turnover of some £500m, needed to ensure that such protection was adequate to the size of business operations.
It logically leads to the principal question therefore; was a bond of €1.3m sufficient?
It also leads to the question; given the representations within the brochure, were Consumers persuaded to make an economic decision that they would not have made otherwise?
It would suggest that Consumers so incensed perhaps by what they perceive to be misleading statements in brochures, which have caused them to make that important economic decision, could be motivated to make a written complaint to the Competition & Markets Authority (CMA) (their site is not exactly Consumer friendly).
Upon receipt of such Consumer Complaints, I would suggest that the CMA would be obligated to investigate and seize documentation that could support such allegations; it would then be for the prosecuting authorities to decide what criminal offences were committed and who should perhaps be charged with these offences.
Equally, the Member State is responsible:
1. What kind of analysis did they carry out when the company first moved to Spain, not only of its liquidity but also of those and their fitness to operate their business?
2. How many assessments were carried out by the Member State?
3. How did they audit the authority to which the power was delegated under Spanish Law; with what frequency did such audits take place?
4. How often did the Spanish State and the Balearic Islands government assess the fitness of the company and also the sufficiency of the bond?
5. Did the Spanish State and the Balearic Islands government apply any form of stress testing on the liquidity of Low Cost Holidays and the Consumer Financial Protection in place?
6. What oversight did the European Commission apply on the Member State under the Treaty and the Package Travel Directive?
The EU Commission is the guardian of the Treaty and its Laws and knows only too well the range of Consumer Financial Protection schemes in operation for travel and how there should be at least a consistency of equal cover within the Union.
Again it would suggest that Consumers so incensed by perhaps what they perceive to be the failure of the Spanish State and the Balearic Islands government that they may be motivated to write a complaint to the EU Commission, complaining of a lack of equal treatment under the Treaty and in L aw to protect their interests. In fact, the Unfair Commercial Practices Directive (which caused the UK to introduce the Unfair Trading Regulations), will have equal force in Spanish Law and therefore suggests a double exposure to failures.
Any Consumers writing a letter of complaint to the EU Commission would cause the Commission to investigate their complaints and I would suggest, in the event that such failures were revealed and proven, could give rise to enforcement action by the Commission against the Spanish State and thereby perhaps causing those Consumers to be compensated by the Spanish State.
Frankly the time has come for Consumers to invest time and energy into making these complaints in order to maximize any compensation they may receive!
We would suggest that those Consumers who would like to make such complaints can do so by using our letters to the CMA and the EU Commission; we would love to hear what responses you receive!
Download our template letter to the CMA here (IMPORTANT NOTICE 26/8/16): We have received a letter from the CMA calling on HTW to remove this template letter. After considering their letter we will not at this time accede to doing so, however, in the spirit of compromise we call on Consumers not to use this letter at this time. We believe that the CMA need to clarify several issues before we give their request further consideration. We believe that the rights and detriment suffered by 40,000 LCH holidaymakers is too important to currently agree to this request. We produce the letter we received from the CMA and our response below; we will update this page as and when we receive a further response from the CMA and will guide Consumers thereafter).
Please note that whatever the situation with the CMA, please continue to use our suggested template letter to the EU Commission below.
Understandably consumers are furious and devastated at the loss of their money, and now it appears that they may have been let down by the Spanish government in governing Low Cost Holidays correctly.
You can also make a complaint to the European Commission on the failure of the authorities in protecting your money; you can do so online here or if you’d prefer to do it by post you can download the form here.
As for what happens now – if you had a booking with Low Cost Holidays, you should speak to the airline, the hotel and any other supplier involved in your booking to find out what has been booked and paid for. You may be asked to pay again, or you won’t be able to travel – if you do, you must keep receipts and details of the booking.
The administrator appointed to deal with Low Cost Holidays has also asked anyone who wants to claim a refund to register it with them by emailing email@example.com. but pay heed to our comments above!
It’s exceptionally frustrating and worrying when a holiday provider goes bust – especially when they were still taking bookings up to the day before they went into administration – and with this pitiful bond now only offering a few pounds as a refund it highlights serious failings in the protection consumers supposedly enjoy with the law as it stands.