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How To Get Money Back When Firms Fail

Cliff D'Arcy
by Lovemoney Staff Cliff D'Arcy on 12 September 2008  |  Comments 25 comments

Sadly, the UK's third-largest tour operator, XL Leisure, went into administration on Friday, leaving 290,000 holidaymakers in the lurch.

The UK's third-largest tour operator collapsed into administration today (Friday), leaving 90,000 holidaymakers stranded abroad. The failure of XL Leisure Group leaves a further 200,000 people with advance bookings out of pocket, and 1,700 employees out of work. (It's also bad news for my fellow Hammers fans, as XL is West Ham United's official kit sponsor.)

Do you have a booking with one of these brands?

Crawley-based XL flies to around fifty destinations from twelve UK airports including Birmingham, Bristol, Glasgow, London Gatwick, Manchester, Newcastle and Nottingham. Its popular brands include Kosmar Holidays (for the Greek islands) and Travel City Direct (to Florida). Here's an alphabetical list of all XL brands:

  • Aspire Holidays
  • Excel Aviation
  • Explorer House
  • Freedom Flights
  • Freedom Flights (Aviation)
  • Kosmar Villa Holidays
  • Medlife Hotels
  • The Really Great Holiday Company
  • Travel City Flights
  • Travel City Direct
  • XL Airways UK
  • XL Leisure Group

It appears that the business is the latest victim of high fuel prices, the economic downturn and the credit crunch, with its directors unable to raise new funding to continue trading. As travel-company collapses go, this is by no means the first and it certainly won't be the last, but it is certainly the biggest failure of recent years. However, XL's French and German operations have been bought by an investment bank, enabling them to continue trading independently.

Advice from the Civil Aviation Authority (CAA)

Customers stranded overseas and their relatives can call the following UK number for advice: +44 (0) 2891 856547. Also, rival airlines including BMI, Easyjet, Flybe and Ryanair have rushed to the rescue by offering to fly some marooned holidaymakers home. The Civil Aviation Authority is also making arrangements to repatriate stranded passengers using substitute aircraft.

If you've booked a holiday via XL but have yet to travel, then you can call 0870 5900927 for advice. However, calls to this number can cost up to 10p per minute, so don't stay on the line for too long!

How to get your money back

With all of XL's services suspended, the plans of thousands of Brits hoping to head off to the Caribbean, Mediterranean (including the Canaries, Cyprus, Greece and Turkey), North Africa or North America are ruined. However, most will be able to get a refund and book a replacement holiday, thanks to these three safety-nets:

1.    The ATOL scheme

The good news is that package-holiday deals booked via bonded tour operators and travel agents are covered by the CAA's Air Travel Organisers' Licensing (ATOL) scheme. This safety-net will repay customers who have booked a holiday in advance with XL. However, the minority of customers who booked a flight directly or via XL.com will have to pay a fee.

2.    Credit and debit cards

If you've paid for a flight or holiday using a credit card or Visa debit card, then you should have no problem claiming a refund from your card issuer. Simply call your bank or card company, explain the problem and then demand a refund. For credit cards, `Section 75 of the Consumer Credit Act' applies, giving you the legal right to a refund if goods and services costing £100 to £30,000 are not delivered.

3.    Travel insurance

Of course, you should never go abroad without first arranging good-value travel insurance, as this provides a valuable lifeline when things go wrong. Some policies cover scheduled flights, so people trapped outside of the UK following the collapse of an airline or travel company may fall back on their travel-insurance policy to get them home. Likewise, anyone with an advanced booking with XL should contact their travel insurer for advice on obtaining a refund.

The people who stand to lose most are those who booked flights directly with XL. Those without travel insurance who didn't pay by credit card or Visa debit card have little hope of getting any money back. So, when you book your next flight or holiday, make sure that you're protected in the event that your airline or tour operator goes bust!

More: Get interest-free credit on your next holiday! | Avoid These Budget Airline Rip-Offs | Lessons From An Airline Collapse

> Compare credit cards at Fool.co.uk

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Comments (25)

  • Fullycircle
    Love rating 0
    Fullycircle said

    It is worth adding that some insurance policies and credit cards do not cover the collapse of a business - always read the small print.

    Travel has become far too price driven and has devalued as an industry as a result of years of discount culture.

    I also think that is is time that people realised that DIY travel has huge potential pitfalls. Travel agents have financial schemes in place such as ATOL but also Airline Failure Insurance. They are also on hand to help resolve any problems that occur - maybe (and hopefully) this will be the beginning of the end for internet travel, there are some excellent travel agents out there who offer excellent value for money but also add a huge amount of value - not easy finding on but my advice is when you do - stick with them.

    Report on 12 September 2008  |  Love thisLove  0 loves
  • uutasyw
    Love rating 7
    uutasyw said

    Under section 75 of the Consumer Credit Act, when you buy goods or services costing between £100 and £30,000 with a credit card, the credit card company is equally liable if the supplier is in breach of contract. So if a supplier goes bust, you can claim compensation from the credit card company.

    As all credit cards in the UK are covered by this Law any small print that would indicate that your not covered is meaningless. If you ever see any terms from a Credit Card provider that it not inline with section 75 please report them to the regulator who will take a very dim view.

    The Visa Charge back scheme is not legally binding, however, all debit cards with the Visa logo must abide by the Visa terms & conditions. Banks sometimes indicate that they don't know about this scheme so make sure you insist thay honour the VISA comditions, or ask to speak to someone more senior. There is no limit to any claim so if you purchased a £100K holiday your get the full amount back. You need to remember that you must claim within 120 days of company going bust.

    With Maestro debit cards your don't have the right to a refund is a company fails so would be the equivalent of paying by cash/cheque.

    Report on 12 September 2008  |  Love thisLove  0 loves
  • churchill123
    Love rating 0
    churchill123 said

    I would never, ever, buy a package holiday, nor on the internet. Always buy a good quality insurance product BEFORE booking any deals.

    Report on 12 September 2008  |  Love thisLove  0 loves
  • MCMXCIX
    Love rating 0
    MCMXCIX said

    maybe (and hopefully) this will be the beginning of the end for internet travel

    Perhaps it will be the end of Amazon selling books online too? Or the end of online banking? >;->

    E-commerce has one huge advantage over high street retail which goes far beyond saving money. Namely that, as long as you have an internet connection, you can conduct your purchases whenever you want and wherever you want. The fact that you get to save money as well is just an added bonus. (Also it has significant advantages for businesses too, given that it slashes overheads).

    The collapse of XL is very unfortunate for those who have lost their holidays, but that's arguably not the fault of "internet travel".

    I also think that is is time that people realised that DIY travel has huge potential pitfalls

    It is time people who do not really want DIY travel stopped pretending they do, I agree.

    It seems that people are quite keen to grab super-cheap seats on Ryanair or other no-frills airlines and then complain about any number of "missing services". "The flight was delayed three hours and they didn't say sorry!" Well, welcome to no-frills travel! What were you expecting? A private jet to provide a relief service?

    If you want in-flight meals and movies and an airport hotel room when you miss your flight and money back when your airline fails then buy a flight with Alitalia instead.

    Report on 13 September 2008  |  Love thisLove  0 loves
  • MCMXCIX
    Love rating 0
    MCMXCIX said

    I might add, that while it's miserable for holidaymakers who have lost their holidays, things are an awful lot worse for XL employees who have lost their jobs. Lets keep things in perspective.

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  • bananamilkshake
    Love rating 0
    bananamilkshake said

    Buying from the internet is not a problem, nor is buying directly from the company as long as you buy using a credit card and spend more than £100. As already said you are then 100% protected.

    One side not mentioned is the story of many small accommodation providers who have contracted with XL to provide accommodation and rely on the Summer income for their enire year's income. Many of these will now find that they won't be paid this year and this can affect some small holiday island's economies very badly.
    For me this underlines how much better it is to book directly with accommodation owners and buy flights directly. Combined with sensible insurance precautions you are as safe as possible and so are the accommodation owners better protected.
    Not putting all eggs in one basket springs to mind.

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  • churchill123
    Love rating 0
    churchill123 said

    I agree bananamilkshake. Experience has taught me that the 'best' deals are seldom found online. By cantacting hotels directly for example, I have found they can negotiate a better deal than online where prices have already been agreed with brokers.

    Flights are still fairly cheap, XL are blaming fuel prices and credit crunch for collapse; well the directors would say that wouldn't they? They still managed to save the French and German ends though?

    Report on 13 September 2008  |  Love thisLove  0 loves
  • smellyunderwear
    Love rating 0
    smellyunderwear said

    Even if you have insurance covering failure of the supplier's business, it won't help if the insurance only covers the period of the holiday. i.e. if the business goes bust some weeks/months before the holiday starts. Get annual insurance.

    Normally you can get refunds if you have to cancel your trip, but not if the company is bust!

    Report on 13 September 2008  |  Love thisLove  0 loves
  • candacraig1972
    Love rating 0
    candacraig1972 said

    Hiya great posts, just looking for some advice, if I was paying a holiday up and made payments on a debit card ( not visa ) I would not be covered if the company went belly up?? Is this correct?? If it is im going to make payments on my dads card!!!

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  • ilikefreefood
    Love rating 0
    ilikefreefood said

    I know that some of you holiday makers might have to loose a bit of money but do you think for once people could think about the 1700 employees of XL like my partner who now have to face redundancey with not a single drop of money for the last months work or redundancy pay and who have mortgages to pay and bills to meet - just because you can't have a holiday isn't the end of the world people not being able to meet their basic living costs might just be a little more important. So for all those holiday makers missing out think about the bigger picture instead of yourselfs!

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  • ilikefreefood
    Love rating 0
    ilikefreefood said

    And on a further point they SOLD the French and German companies -i.e. they got finance please will you get things right before making stupid presumptions. Maybe if the British weren't so hell bent on getting 'cheep deals' and racking up debt left right and centre airlines would be able to survive.

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  • churchill123
    Love rating 0
    churchill123 said

    ilikefreefood, does this not seem to suggest that other than the French/German operations it's possible to surmise that they couldn't have solf the UK operations?

    Are you saying the consumer was bending over and asking for this?

    Very strange.

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  • ilikefreefood
    Love rating 0
    ilikefreefood said

    Not at all - all I I am saying is maybe the customer SHOULD think about those in much worse situations. The company tried to refinance the various companies over the past few weeks- luckily the French and German sections were brought in time (Thursday in fact) as you are aware XL is a large company with the airline in the UK being a very small part. It didn't just decide to go bankrupt over night. I wish that all we had lost was a cheep holiday abroad - at least those people will get their money back - how about all those who have lost jobs with no salary for the work they have done? They can't get it back!

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  • churchill123
    Love rating 0
    churchill123 said

    true.

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  • rpjackson
    Love rating 0
    rpjackson said

    I am again amazed that so much media and websites constantly advise travellers to book them selves and direct to save money. No mention of security and heyho here we go again. Abta used to offer the security for packages now give by ATOL. But again why hasnt the government insisted taht airlines offer the same cover. Oh dear did they ask ba's advice again.

    Advise in any form which does not (IN LARGE LETTERS) advise of the pitfalls of insecure methods of booking should make that adviser culpable . Or in big letters CAVEAT EMPTOR.

    Secure traveller Sidcup

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  • trottytroo
    Love rating 0
    trottytroo said

    just a note, one credit card company that i know of, has got an automated service telling anyone that booked with xl to go to atol and get claim form, no mention of being able to claim back from credit card company. where do we stand with this, as a refund through atol takes 6-8 weeks.

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  • churchill123
    Love rating 0
    churchill123 said

    As far as I am aware trottytroo, you're covered if you booked via the internet in some cases. If a supplier has failed to provide goods and services charged, as far as I know you're legally entitled to request a chargeback. I figure that your credit card company knows they themselves won't see a cent of the money which is why they're telling customers to talk to ATOL, because they still have to credit your account, the chargeback request is their problem imho.

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  • churchill123
    Love rating 0
    churchill123 said

    As a footnote and reference to a previous posting of mine, it's been reported in the news that KPMG quit XL in 2006 and refused to sign their books due to 'accounting irregularities'. BDO took over afterwards, KPMG warned the board back then in a 'strongly worded letter'. So it seems that it may not be oild prices in themselves and 'the credit crunch' which seems to be a popular blame, for the collapse.

    Report on 14 September 2008  |  Love thisLove  0 loves
  • molkapolka
    Love rating 0
    molkapolka said

    Oh dear! Whilst I'm awfully sorry for ilikefreefood, I'm also quite keen to avoid losing the money I'VE worked hard to earn because the company has gone down. Noting that there seem to have been warning signs according to churcill123 some time before XL failed, does anyone know where information on companies which might be likely to be the next to fail might be found? Or am I being too naive?

    Report on 14 September 2008  |  Love thisLove  0 loves
  • afisk
    Love rating 0
    afisk said

    I suppose it's too late to claim on the ticket from Liverpool to London that I had when British Eagle went bust in 1968!

    Report on 15 September 2008  |  Love thisLove  0 loves
  • trinityvelocette
    Love rating 0
    trinityvelocette said

    My sympathy goes out to the workers who have lost their jobs over this travel company collapse. As a previous posting said, there's worse things that not being able to go on holiday. Interesting post about KPMG refusing to sign off the accounts in 2006 - was the writing on the wall then? I just booked my Florida hol in line yesterday with an ABTA bonded company - is this same/better than ATOL cover?

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  • babsnn
    Love rating 0
    babsnn said

    Hi, following on from advice above, I have just rung my Visa Debit people (Nationwide) and was told that they cannot/will not guarantee any refund of anything paid for by Visa Debit under these circumstances. So I am going back to my original plan and claiming back via ATOL. Nationwide tell me that I can only go through them once I have failed to get any joy from ATOL and it is still not guaranteed. Round and round in circles or what!

    Report on 15 September 2008  |  Love thisLove  0 loves
  • jenncatt
    Love rating 0
    jenncatt said

    Just out of interest, does anyone know which travel insurers do cover airlines etc going bankrupt? Because I was under the impression that Columbus Direct were pretty comprehensive, but they don't cover this, and nor do any of the other companies I've had quotes from so far today..

    Report on 15 September 2008  |  Love thisLove  0 loves
  • ilikefreefood
    Love rating 0
    ilikefreefood said

    May I just add to the comments regarding warning signs, what do you think would have happened if a month ago XL warned people they might go bust? I think consumers would have asked for refunds and XL would have gone bust a month earlier. If you look at all companies that go bust they do it instantly as far as letting people know but no company would just go bust. XL worked very hard to keep the comapny going. As I have said before keep this in reality some people have just lost a holiday but the employees have lost a great deal more. There are no credit card companies or banks who are going to pay Septembers wages or redundancy pay.

    Report on 16 September 2008  |  Love thisLove  0 loves
  • churchill123
    Love rating 0
    churchill123 said

    Company directors have a duty to avoid what is called wrongful trading. In other words, they carried on taking money from customers when they knew that there was little or no chance that they could keep going.

    As for XL's employees; they are the start of very many tragedies waiting to happen over the coming year or so.

    Report on 16 September 2008  |  Love thisLove  0 loves

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