Protect your holiday from busted firms
As yet another holiday provider goes bust, how do you protect yourself from a company going under, asks Roisin Burke
LAST week 1800Hotels filed for bankruptcy, scuppering holiday plans for hundreds of Irish customers and more worldwide. As the online hotel booker wasn't covered by the bonding scheme that protects holidaymakers' money when a travel firm collapses, many could find themselves out of pocket.
Though we are emerging from recession, companies of all sorts have still been going bust at a rate of knots. Four ceased trading each day this year to June, the Insolvency Journal has reported.
If a furniture shop, a beauty salon, a hotel, or a tradesman is in trouble or goes out of business, ordinary customers are usually deemed to be 'unsecured creditors'. This means that if you're owed money, or goods, or a service, you are well down the list when it comes to getting compensated.
Where a holiday operator goes under, the situation can be more promising, depending on the type of business it is and whether they're bonded -- more on that below.
Red-flag terms to watch for with any company that has your money or goods are "receivership", "examinership" and "liquidation". These are court measures designed to protect companies from their debtors -- including you. But there are measures you can take to protect yourself from losing out to a company in trouble.
DON'T Pay upfront
For holidays, sofas, building work etc, pay as little as possible upfront. Pay the minimum deposit possible and avoid, if you can, paying the full amount in advance.
If you're booking your wedding reception or honeymoon, for example, bear in mind how volatile some hotels and travel businesses are at the moment. Keep deposit amounts low and put them on your credit card (you'll see why below).
If you have paid money upfront to a company in difficulty, contact the liquidator, receiver or examiner to see what will be done to either honour your order or refund you. Where the company is part of a larger parent business, you may be able to pursue getting your money back or your order honoured through them. That's what Irish Habitat customers were able to do after the shuttering of the Irish furniture stores in 2008. "Orders were fulfilled and vouchers were honoured by the UK Habitat," says John Shine of the National Consumer Agency (NCA).
If you're being pressured by, say, a painter or tradesman to come up with a large amount of money in advance, ask yourself why. Is this a sign of a worrying cash-flow problem that could lead to you being left with work undone and being out of pocket?
If you have any doubts about a company's solvency, be especially wary when paying money towards delivery of something that could take weeks or months. The longer it takes to get your goods, the more exposed you are to the business going under in the meantime.
Avoid paying unnecessarily for things in advance. For gym or club memberships, consider paying in instalments rather than upfront.
HolidayS gone WEst?
Package holiday providers like travel agents and tour operators should be bonded. That means that your costs are protected by the Commission for Aviation Regulation (CAR), which issues travel operators' licences, if the company collapses.
The Package Holidays and Travel Trade Act 1995 sets down that all travel agents and tour operators must be State-bonded, which means if yours go belly up, you're entitled to compensation. For further information see the CAR site at www.aviationreg.ie.
Holiday makers who book trips with Irish tour operators or travel agents that leave from Belfast or London or elsewhere in the UK should note that they are not covered by the CAR bond, even though they've booked here with an Irish provider. "In this case consumers need to clarify that the agent has an alternative protection, such as the Irish Travel Agents Association's bond or insurance to cover them, the law requires it," says John Shine.
If you've gone for a do-it-yourself holiday instead of a package, where you booked your own flights, accommodation or car hire, those providers aren't covered by the CAR bond, so your plans and money are at risk if one of these goes belly-up.
For what's not covered by the CAR bond, it may be possible to claim back money through your travel insurance.
"You need to look out for 'scheduled airline failure' cover provision on your policy," says Blue Insurances' Ciaran Mulligan. If the airline collapses, you may be able to claim back the price of your flights if your policy has that provision.
"Also look for 'third party supplier insolvency cover'," advises Mulligan. "This covers car hire companies, theme parks and hotel accommodation providers going bust."
Blue Insurances' travel cover and Annual Multi Trip products offer both as part of their standard cover, at www.blueinsurance.ie. It also offers this cover on the travel insurance it provides for Axa at www.axa.ie.
Scheduled airline failure cover features in some policies, but third party supplier failure is a less common feature. "Those that do offer third party supplier insolvency cover often don't offer it for accommodation suppliers, such as 1800 Hotels. At the moment only Blue Insurances' travel insurance and Axa's annual multi trip can cover accommodation providers going bust," Mulligan says.
USE A credit card
Your goods or service are protected by the credit card chargeback scheme that should see them get back the full amount paid if the business you're dealing with fails.
Contact the credit card provider if attempts to get your goods or service get you nowhere. Keep your receipts or online confirmation details -- you may need to provide a copy of them.
"Anyone who has booked with 1800Hotels by credit card should be entitled to get their money back through the credit card chargeback scheme," says Mulligan.
We checked with the main credit card providers at Bank of Ireland, AIB, Ulster Bank and MBNA. Customers are being advised to check if the hotel is honouring the reservation first of all. If not, get written confirmation of this from the hotel. If the hotel isn't honouring the reservation then the chargeback rule applies and your credit card provider should refund you.
This doesn't apply to Laser cards, unfortunately, but for other debit cards it can. If you paid with a Visa debit card, you may be able to claim your money back.
Many small trades people and some smaller businesses won't accept credit cards, so it's not a safeguard in every case.
Use vouchers or credit notes sooner rather than later. If the business fails, "vouchers and credit notes might not be honoured", warns the NCA.
If the business is part of a big chain, you may have some recourse to get the voucher or note honoured, but it can be a long process.