Banks urged to clear up confusion over refunds for coronavirus cancellations

The banking industry is taking an inconsistent and confusing approach when dealing with refund claims for customers who have reached a stalemate with a business over refunds for coronavirus cancellations, new Which? research reveals.

With huge numbers of consumers deeply dissatisfied with travel companies and other businesses asking them to accept credit notes or rebooking instead of offering refunds, Which? has heard reports from frustrated bank customers who have had claims turned down.

This includes one customer who was denied a refund of a £2,200 payment split between Halifax and Metro Bank cards for a cancelled ski trip and another left £750 out of pocket after RBS rejected her claim. In both cases the customers were told a refund was not possible because they were being offered credit notes or vouchers.

The cases prompted the consumer champion to investigate how banks are handling claims under two forms of consumer protection.

The first of these protections is chargeback, which covers all card payments. While not a direct consumer right, it is a process provided under card schemes which reverses a transaction if a customer is not able to resolve a dispute with a business for a variety of reasons.

The second is Section 75 of the Consumer Credit Act 1974, a legal protection for credit card users on purchases of more than £100 and less than £30,000, which gives the customer a claim against the card issuer as well as the retailer or trader for the goods or service supplied.

Despite guidance issued by Mastercard and Visa stating that customers are able to pursue the chargeback route if they are offered a voucher or the option to rebook, when Which? asked banks to confirm if they would attempt to process refunds, many stated that claims would need to be handled on a case by case basis. The same applied to Section 75.

Which? is concerned that a failure to provide even general information about the circumstances where a claim could be successful risks leaving consumers unaware of vital consumer protections that could help them get their money back at a time when people’s finances are significantly stretched.

However, some banks did provide clearer information about the prospects of consumers getting their money back. In relation to chargebacks, Virgin Money (Mastercard) made it clear that if the alternative arrangements are not covered in the terms and conditions, they would normally expect a chargeback to be successful.

Starling Bank (Mastercard) and Lloyds Banking Group (Mastercard and Visa) said that they will initiate a chargeback where the offer of vouchers or free rebooking is not deemed suitable by the customer.

But Which? has also heard from a Halifax customer who was turned down for a chargeback request for a cancelled holiday based on these circumstances, despite the bank being part of Lloyds Banking Group, raising fears that the rules are not being applied evenly. The number of people using the free Which? chargeback and Section 75 tool has shot up to 10,000 in March and April so far, compared to 1,000 in January and February of this year. This highlights how many people are getting nowhere with businesses on refunds, often in cases where a significant amount of money is on the line.

Amid confusion over the protections the banks offer in these circumstances, Which? is calling for the industry to be more upfront about the situations where chargeback and Section 75 are likely to be appropriate for consumers in relation to coronavirus-related cancellations. It believes banks should follow the lead of those in the industry who have committed to providing customers with the best prospect of getting their money back.

Gareth Shaw, Head of Money at Which?, said:

“While it is a very difficult time for businesses, the coronavirus outbreak has also put people’s finances under considerable pressure, and they deserve to get their money back if they want a refund for a cancelled event or trip, rather than a voucher or the option to rebook.

“However, there is clearly confusion about the circumstances which allow banks to help their customers achieve this. There needs to be greater clarity and consistency about claiming through banks, and the industry should ensure that all bank customers have a fair chance of getting their money back.”

Case study

Which? has spoken to customers at Halifax (part of Lloyds Banking Group), Metro Bank and Royal Bank of Scotland (RBS) who were each told that they are not eligible for card refunds because the businesses in question have offered a suitable alternative.

This includes Sally Curnick, 51, from Essex who booked a £2,200 family ski trip with Sunweb Holidays to visit her daughter.

She was assured that she would be fully refunded if resorts closed, but the travel company has since told customers that it can only offer a “SGR-coronavoucher” – a credit note entitling them to book a package holiday within one year after the issue date. Sally believes it’s unfair to expect consumers to bear these costs and isn’t in a position to rebook the trip, and having split the cost on two cards she asked Halifax (part of Lloyds Banking Group) and Metro Bank to help. However, both banks told her chargeback isn’t possible because Sunweb has offered a voucher.

This contradicts the Lloyds Banking Group claim that it can pursue a disputed transaction claim under their chargeback process in the card scheme rules as long as a customer has proof that a refund has not been offered. Metro Bank has now said it will review Sunweb’s written T&Cs before outlining next steps. Lloyds is also reassessing Sally’s request.

Sally said: “We do understand the global predicament the travel industry is now in but having booked knowing we were protected by ABTA we feel extremely short changed. With regards to the banks and a chargeback, both banks initially said no and have, we feel, not been very forthcoming with a resolution. We have made several attempts to contact the banks and have come to a dead end.”

Meanwhile, an RBS customer is in a similar position after being told by her bank that her dispute is not eligible for a refund because the airline in question offered vouchers in lieu of the flight. She said: “As we expect them to go bust imminently, or at least flight prices to rise significantly, we definitely do not want vouchers and feel it is unfair that they have almost £750 of our money. We feel trapped in some Kafkaesque situation where no one will refund the money that we are owed which feels very unfair.”

RBS said it looks at each claim on a case-by-case basis.


1.     Responses from banks:

2.     Mastercard guidance:

3.     Visa guidance:

4.     Chargeback allows you to ask for a transaction to be reversed if you aren’t able to resolve a dispute, including services not delivered. This covers all card payments though it isn’t a direct consumer right – it’s a process agreed between financial institutions and the relevant card scheme (Amex, Mastercard or Visa). Card issuers aren’t legally compelled to raise chargebacks but the Financial Ombudsman Service (FOS) has said it expects banks to attempt one where there’s a reasonable prospect of success.

5.     Under Section 75 of the Consumer Credit Act 1974, your credit card issuer is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader – as long as the value of the goods is more than £100 and less than £30,000.  Even if you’ve only used your credit card to cover a deposit, your provider would still be liable to refund you for the full amount. Most card issuers will ask if you’ve sought reimbursement from the retailer or trader before pursuing a claim, but remember this isn’t an obligatory first step – just always be clear you want to make a Section 75 claim under the Consumer Credit Act 1974.

6.     Flight cancelled: can I get a refund from my credit card?:

7.    American Express (Amex), which runs its own chargeback scheme, is yet to respond to questions from Which?.

8.  Coronavirus cancellations: are banks unfairly rejecting refund requests? (Live from 00:01 Tuesday 28 April) 9. Which? chargeback tool:

Press Release