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Dealing with Refunds and Cancellations webinar FAQs

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The information provided in the webinar hosted on 25 June and the FAQs is not legal advice but is a general overview to help you navigate your way through the complex issues of cancellations and refunds and make more informed decisions about your specific case.

You can find the full webinar recording on YouTube or Mixcloud.

Panellists:

  • Elizabeth de Stadler | ASATA Legal Counsel
  • Nicky Stetka | Consumer Goods & Services Ombud (CSGO) Complaint Manager
  • Otto de Vries | ASATA CEO

As an additional resource, please refer to the ASATA Cancellations and Refunds Guide and its resources, to better assist you with cancellations and refunds at a time of Covid-19.

This information deals primarily with cancellations that have occurred as a direct result of the pandemic and the customer being unable to travel (e.g. cancelled flights or country-wide travel bans) and not cancellations due to disinclination to travel (e.g. if the customer cancels because they are nervous or they expect their travel will eventually be cancelled.) This information speaks heavily to airlines but applies to all suppliers.

The current situation

The current situation in which travel agents, travellers, and suppliers find themselves is truly unprecedented. Our laws and regulatory bodies, including the Consumer Protection Act (CPA) and the Consumer Goods and Services Ombud (CSGO), were not developed with a pandemic of this magnitude in mind and are, therefore, unclear in some instances.

As ASATA, we will continue to seek clarity and answer all of your questions to the best of our ability.

The CSGO says that consumers who are faced with a service that has not been delivered must be given the option of a voucher or a full refund. However, in many cases, particularity with airlines, suppliers are not giving the option to even apply for a refund.

Instead, most suppliers are issuing travel vouchers. These vouchers may differ in their terms and conditions, flexibility, and validity ranging from 12 months up to 3 years.

Consumers may wish to reject a voucher because it is uncertain when travel can resume, exacerbated by the fact that many individuals are faced with their own financial pressures right now and would, therefore, prefer their money back.

The travel agent, as an intermediary, then finds themself in a difficult position between the supplier who will not issue a refund, and the consumer who wants their money back.

Your business model and Terms & Conditions will impact your situation

A travel agent’s business model affects how the law applies to their situation. This has to do with the contracts in place.

For instance, you may just act as a go-between for your client and the supplier where the contract is actually between those parties, and thus the booking is subject to the supplier’s terms and conditions.

The other scenario is when travel agents act as wholesalers. In this case, you would package various travel services to sell to your clients, and there would be a contract in place between you and your client, and you and the supplier. Depending on what these contracts say, you may be part of the transactional chain, and therefore your legal position will be slightly different.

There are also different considerations if you are on the inbound side, and based on your Terms and Conditions, South Africa’s Consumer Protection Act may not even apply.

What does the Consumer Protection Act say?

You can view the Consumer Protection Act document in full here. SATSA also has a comprehensive FAQs page on consumer protection with answers from legal expert Trudie Broekmann that you can find here.

Consumer’s right to cancel advance reservation, booking or order

17.(5) A supplier may not impose any cancellation fee in respect of a booking reservation or order if the consumer is unable to honour the booking, reservation or order because of death or hospitalisation of the person for whom, or for whose benefit the booking, reservation or order was made.

Over-selling and over-booking

47.(3) If a supplier makes a commitment or accepts a reservation to supply goods or services on a specified date or at a specified time and, on the date and at the time contemplated in the commitment or reservation, fails because of insufficient stock or capacity to supply those goods or services, or similar or comparable goods or services of the same or better quality, class or nature, the supplier must—(a) refund to the consumer the amount, if any, paid in respect of that commitment or reservation, together with interest at the prescribed rate from the date on which the amount was paid until the date of reimbursement.

47.(4) It is a defence to an alleged failure to supply any goods or services, as contemplated in subsection (3), if—(a) the supplier offered to supply or procure another person to supply a consumer with comparable goods or services of the relevant kind to satisfy the consumer’s request; and (b) the consumer—(i) accepted the offer, and the supplier has supplied or procured another person to supply the goods or services so offered and accepted; or (ii) unreasonably refused that offer.

Note that the same principles apply to the entire transactional chain, whether a consumer booked directly with a supplier, or whether they booked via an intermediary like a travel agent. This is why a travel agent’s legal position differs depending on whether they are a wholesaler, i.e. a part of the transactional chain, or whether they are simply a go-between for the consumer and supplier.

What does this mean?

It is the view of the CSGO that subsection 17.(5) applies in that all customers should be treated as if they are hospitalised, i.e. unable to travel, and therefore suppliers must refund the consumer in full and may not charge a cancellation fee.

Despite the heading, subsection 47.(4) may even be more applicable to the current situation in that supplier has failed to deliver goods or services, not because of insufficient stock or capacity as stated in the subsection, but due to circumstances beyond the supplier’s control. The CGSO has issued an advisory note on sections 47.(3) and 47(4) which explains how they apply in more detail. You can find that advisory note here. These sections are also discussed in more detail in the ASATA Cancellations and Refunds Guide.

In summary, no matter which sections are relied upon, the end result remains the same. The CPA’s overall position is that consumers who are unable to travel due to travel bans or a cancelled flight by the airline, are entitled to a full refund from the supplier if they do not receive the goods or services for which they paid.

However, the situation with Covid-19 is not as clear. Most airlines are issuing vouchers in lieu of refunds, leaving travel agents unable to refund their clients for money that was paid to them as an intermediary.

This is where the Consumer Services & Goods Ombud has weighed in with their view that, in these unusual circumstances, consumers must be reasonable.

What is the role of the Consumer Services & Goods Ombud?

The Consumer Services & Goods Ombud (CSGO) handles consumer complaints free of charge and investigates alleged contraventions to uphold the industry code of conduct.

When and where possible, they will pass complaints on to the relevant suppliers. And in some cases, the CSGO will refer complaints to the relevant trade or industry associations, such as ASATA. 

When a complaint is escalated to a supplier, the supplier has 15 days to investigate and propose a solution.

The CSGO plays a mediating role – not an enforcement role – and it will try to mediate a resolution that is suitable to all parties.

What does the Consumer Services & Goods Ombud say about cancellations and refunds?

The CSGO says that an intermediary such as a travel agent must pass any refunds they receive from suppliers onto their clients. But where they cannot recover refunds from suppliers, as seen with airlines, a reasonable offer to the consumer for postponement is considered fair.

A voucher valid for two to three years is viewed as a reasonable offer for postponement, and the CSGO encourages consumers to accept this if it is feasible. Of course, there are several circumstances where the consumer was meant to travel for a specific event that has now passed (e.g. weddings, conferences, etc.) and the voucher should be reasonably flexible enough for the consumer to still use it in a meaningful way, for instance allowing for the destination to be amended.

If the consumer is not happy with this option and still wishes to demand a refund, they must first reject the voucher.

When the CSGO cannot resolve a complaint, it will advise the consumer to take their complaint to the National Consumer Commission (NCC), which will then conduct its own investigation into the complaint. Involving the NCC is similar to going to court on the matter and, to avoid a prolonged and possibly costly process, most parties will try to reach a resolution before this point.

Does the Consumer Protection Act apply to an intermediary?

If the intermediary is an individual or a juristic person with a turnover and asset value of under R2 million (at the time of the transaction), then they are fully protected by the CPA and can demand whatever has been paid out to the end supplier.

If the intermediary sits above the R2 million threshold, they would need to negotiate with the end supplier. Ideally, the intermediary would have had an indemnity in their supplier contract T&Cs, which stipulated that if you have to pay out a consumer in terms of the CPA, the end supplier should either reimburse the intermediary or be prepared to split the amount due so that there is fairness in the relationship.

Does the Consumer Protection Act apply to international individuals and overseas suppliers?

It depends on where the contract was concluded and what the T&Cs state. It does not necessarily matter where the consumer is located. Therefore, the CPA can apply to an international individual if they entered into a contract with a South African travel service provider.

If, for instance, an airline originates overseas, and its service is purchased by either a South African or an international individual, then a different set of laws and consumer rights may apply. Again, it comes down to the T&Cs in the contract.

What should travel agents do if their clients request a refund that they are unable to recoup from a supplier?

In principle, the CPA states that consumers must be offered the option to choose either a voucher or a refund. Of course, in many cases, travel agents themselves have not received the refund from the supplier and thus simply do not hold the funds to pass onto their client.

However, the CPA was not developed with a situation like Covid-19 in mind, and the legal position is not entirely clear. For this reason, the CSGO encourages a compromise resolution where consumers accept a flexible voucher.

In the majority of cases, consumers have been reasonable, but travel agents need to remain empathetic and communicate to their clients what they are doing to provide value.

If your role is facilitating a contract between the consumer and supplier, advise your client of their rights and be an advocate on their behalf.

ASATA has a step-by-step guide and letter templates travel agents can use to assist them with these communications:

A: Explain consumer rights

B: Explain Covid-19 policy

C: Advice if travel service provider is not processing applications

D: Response to letter of demand

E: Communicating to your client about your Covvid-19 policies

Furthermore, you should advise your clients that the CSGO will only take complaints from individuals. Complaints from legal representation will be turned away – the CGSO advises that complainants with legal representation must rather take their matters straight to the National Consumer Commission.

Can travel agents still charge a cancellation fee for a travel booking that is rendered impossible by the travel ban?

No, you cannot. The CGSO is very firm on this even if your T&Cs provide for a cancellation penalty. The CPA overrides any T&Cs, and the CPA’s position is clear. All consumers who are unable to travel due to travel bans or a cancelled flight by the airline are entitled to a full refund from the supplier if they do not receive the goods or services for which they paid.

But, can a travel agent charge the consumer a separate administration service fee for assisting the consumer with administration surrounding the cancellation and getting a refund?  

This depends on what the Terms & Conditions say in the contract between the travel agent and consumer.

If the T&Cs state that the travel agent can levy a separate administration service fee – given that it is fair and reasonable – and the consumer agreed upfront when the booking was made, then a separate fee may apply for the work incurred to cancel the booking, rebook, apply for a refund on behalf of the consumer, etc. If this is not clearly stated in the T&Cs, or the customer has not agreed to pay an administration service fee for this assistance separately, then the travel agent may not levy an administration service fee.

T&Cs cannot override the Consumer Protection Act, but if the T&Cs include a proper description of a travel agent’s service as an intermediary, e.g. providing advice, negotiating with airlines, changing itineraries, etc., then a travel agent is entitled to get paid for those services. But the customer must agree to pay for this service.

T&Cs should be written in plain language. It is important to clearly describe your services and how you calculate your separate administration service fees for assistance rendered after a booking has been cancelled. A lack of clarity is bad for everyone.

Can a travel agent keep the commission earned on a cancelled booking?

Unless the original T&Cs state otherwise, then any commission earned on a booking that is cancelled must also be refunded to the consumer – along with the full amount received from the supplier.

If the travel agent no longer has the commission amount, because it has already been paid out and spent, as may be the case, the travel agent can propose mediation to try to find the most reasonable resolution for each party, considering the circumstances.

If the customer still insists on the commission being refunded in full, the travel agent could propose a payment plan arrangement to alleviate some of the burden. Transparency and empathy are required from everyone right now.

If a credit card company reverses a transaction, is it legal for an airline to ADM a travel agent?

This is occurring as credit card companies reverse transactions for flights that have been cancelled. In response, airlines are sending the travel agents involved agency debit memos (ADM) requiring them to pay the transaction amount back to the airline.

Whether this is legal or right depends on whose credit card was used to make the booking, i.e. who the contract is between. If the booking was made on the consumer’s credit card, then the airline should not be issuing an ADM against the travel agent.

If a travel agent receives an ADM, they should lodge a dispute with both the credit card company and the airline. 

Also note that Mastercard and Visa have chosen not to reverse any transactions where there is an unsettled dispute, for instance, if the consumer rejects a voucher and demands a refund.

There is a lot of ambiguity on this at the moment, and ASATA will be putting together resources to help travel agents navigate the issue of ADMs going forward.

If a customer cancelled due to disinclination to travel, can they get a refund?

If a customer cancels their trip or scheduled flight because they feel disinclined to travel or because they expect that it will eventually be cancelled, they are not entitled to a refund.

Customers are entitled to a refund only where travel bans/restrictions are in place, or a flight is cancelled by the airline. Even if the flight is eventually cancelled by the airline, the policy in place at the time of the consumer cancelling is the policy that will apply to the refund.

What happens if a customer receives a voucher for future travel or they postpone their travels, and the travel service provider is liquidated?

A customer who has a voucher for service from a supplier that goes into liquidation becomes a creditor. As a creditor, they can lodge a complaint with the liquidator but are advised to do so under that condition that they cannot be made to pay in, e.g. should the liquidator try to recoup the amount of the voucher.

It is possible that this situation may be seen with more frequency going forward. ASATA will work to find answers and offer recourses for travel agents and their customers in these difficult scenarios.

What options are available to customers with a flight or voucher from SAA or SA Airlink?

On 6 December 2019, SAA was placed under business rescue because it did not have the working capital to fund operations. SA Airlink, an SAA codeshare and franchise partner, indicated that for unflown tickets issued before 6 December, customers should receive refunds from SAA.

However, SAA has not yet released refunds to all of these customers. If a customer is still owed money from SAA for unflown tickets issued before this date, they may lodge an application as a creditor to define what they are owed.

The business rescue plan submitted to Government includes a provision for covering the costs related directly to unflown ticket liability. If the business rescue plan is accepted by Government, creditors can expect 7,5 cents to the rand on the price of their ticket. If the plan is not accepted, then SAA will go into liquidation, all vouchers will be lost, and there will be no unflown ticket liability.

SAA’s policy since Covid-19, like most other airlines, has been to offer vouchers in lieu of refunds.

ASATA will be closely following what happens with SAA and seeking further clarity on issues of refunds and vouchers.

The impact of COVID-19 on the travel industry is unprecedented and unpredictable. The nature of the content that is being shared on the ASATA coronavirus microsite is therefore constantly changing. Please check the date of the post to ascertain its recency.
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