HCR Law Events

9 July 2020

Refunds during Covid-19: top tips for consumers and compliance advice for businesses

The Competition & Markets Authority (CMA) has recognised that there are a wide range of contracts that have been affected because of the Covid-19 pandemic. To help consumers understand their rights and to help businesses treat their customers fairly, it has issued guidance that sets out its general views about how the law operates in this area. In this article we’ll provide top tips for consumers seeking refunds for cancelled services and offer advice for businesses to help them avoid falling foul of consumer protection law.

Top tips for consumers

  1. Know when a refund may be due – the CMA’s robust view is that this is when:
    • a business cancels without providing any services, e.g. a wedding venue cancelling on or before the date;
    • a business is prevented from providing services because of Government health measures, e.g. professional sport mandated to be behind closed doors;
    • you cancel, or are prevented from using services, because of Government health measures, e.g. you cannot attend an event because of local lockdown measures.
  2. If you booked flights but could not travel due Covid-19 or Government health measures you may claim a refund for up to 12 months after the departure date. If you have an ATOL certificate your money is safe and protected.
  3. A partial refund should be due for services only part used or received, for example if only half a sporting season ticket is fulfilled. The same applies for ongoing contracts such as gym memberships. Further payments may be withheld until services can be provided and received.
  4. Alternatives such as credits, vouchers, rebooking or rescheduling can be offered, but you can insist on a refund.
  5. In limited circumstances deductions can be made as a contribution to costs incurred in relation to your contract, but only when the business cannot recover them elsewhere.

Advice for businesses

For businesses, a careful approach is required because the CMA is taking a dim view of unfair practices. Consumer awareness is growing and the CMA has lobbied for greater enforcement powers.

However, you can create a defendable position by ensuring that:

  • terms dealing with cancellations and refunds are clear and easily understandable by consumers and drawn to their attention before the contract is formed;
  • deductions from refunds are justifiable as legitimate contributions to costs;
  • terms are used fairly, balancing its rights against the consumer’s.

This final point is key. A consumer contract term may be perfect from a contractual construction perspective. However, it may still be unfair under the Consumer Rights Act 2015 if it causes a significant imbalance in the rights and obligations of the trader and the consumer, to the consumer’s detriment.

In other words, businesses selling to consumers should always look to achieve a balanced outcome when operating their terms and practices.

Get in touch

Our Commercial Team regularly advise on consumer rights issues and can help you navigate this technical area, including ensuring that your terms and conditions and processes are compliant with consumer protection law. Contact Kevin Mahoney on 01242 246 426 or at [email protected]

Should an issue escalate our Dispute Resolution Team are here to help. We have recently advised on an increasing number of holiday complaints and disputes, securing refunds from holiday providers who previously refused. Contact Fiona Hayles on 03301 075 955 or at [email protected]

This article does not constitute legal advice. Specific legal advice should be taken before acting on any of the issues covered.

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About the Authors
Kevin Mahoney, Associate

Kevin Mahoney is a Cheltenham solicitor, specialising in commercial.

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Fiona Hayles, Partner, Head of Banking Litigation

Fiona Hayles is a Cheltenham solicitor, specialising in dispute resolution.

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