Finance Fridays – What happens if my holiday company goes bust?

Welcome to this week's Finance Fridays. Last week we were looking at school holidays on a budget. We're still on a the holiday theme this week and thinking about people's plans for jetting off abroad. I hoped this was a post I didn't need to write but in the last week the news has broken that a major holiday company has gone bust leaving thousands of its customers in the lurch.

Last Friday lowcostholidays announced it had gone into administration. Up to the day before it was still taking bookings through its online site. The collapse of the company was blamed on poor trading conditions this year – holidaymakers fearful of booking to terrorist hit destinations such as Turkey, Tunisia, Egypt and of course France, concerns about the result of the EU Referendum and the affect of the pound against other currencies in the aftermath of the vote. Such a combination means lowcostholidays may not be the only company that suffers problems this year. If you have booked a holiday abroad here's a guide to what help you can get if your holiday company goes bust.

Check if they are members of ATOL and ABTA – When lowcostholidays moved their offices to Mallorca they left behind their memberships of the Air Travel Organisers' Licensing (ATOL) scheme and Association of British Travel Agents (ABTA). If you booked a package holiday through an ATOL member then your flights will be protected. Do be aware if you put together your holiday yourself by booking separate flights and accommodation then you will not be covered by the ATOL scheme.

If they are an ABTA member then you should be able to continue with your holiday if you are already away or get a refund. You can check if your tour operator is a member of ABTA here. Do check as some companies like lowcostholidays move location whilst others fraudulently claim to be members.

Payment method – Pay by credit card. For purchases over £100 you will be covered by section 75 of the Consumer Credit Act 1974 if you booked directly with the tour operator. Make sure you keep all your receipts and paperwork.

Some people who were already on their holiday booked through lowcostholidays were asked by their hotels to pay again once they it was announced they had gone bust. If this happens to you do check with the original holiday company whether or not it has been paid for as some may take advantage of the situation. If you do have to pay again make sure you do use a credit card and keep a breakdown of the costs.

If you paid by a debit card your bank may refund you through a scheme known as 'Chargeback'. This works in a similar way to how credit card purchases are covered however it is a voluntary scheme and debit card providers are not legally obliged to do it. It also requires the debit card provider to get a refund from the company you've paid.

Travel insurance – Unfortunately very few policies cover holiday company failure. It's worth having a look through your policy but don't rely on it to get your money back.

Have you ever had a holiday company go bust on you? Do you check you will be protected before you book?

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