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Demise of Lowcost Travel Group impacts on travel merchant facilities as consumers recoup losses via card issuers

The failure of the Lowcost Travel Group continues its negative impact across the travel industry as consumers recoup their losses via card issuers. 

The Lowcost Travel failure took place dramatically in July 2016 with 27,000 customers abroad and 110,000 forward bookings. It left an estimated £75 million debt to creditors but the company had less than £10 million in assets and a guarantee of just €1.3 million with the Balearics regulator.

 Initially consumers were advised not to be optimistic about getting back money paid for travel arrangements; but later, advice was given on the UK Cards Association website to the effect that although refunds of accommodation-only bookings were unlikely, there could be good news for consumers in that many who paid by paypal, credit or debit card could get their money back.

But that was only half the story as the impact of the failure continued to be felt across the travel industry with the losses of tens of millions of pounds from the collapse initially being borne by banks and credit card companies and consequently passed on to merchants.

Financial institutions are likely to revise their risk assessment of travel and what this means for merchant terms. This could show in even longer periods of deferment of receipt by merchants of payments made by customers; higher service charges and the imposition of security terms; as well as heightened difficulties in obtaining merchant facilities at all.

Thankfully, Serenity’s relations with the industry’s key suppliers of merchant services continues to improve despite their revised risk assessment of travel companies. A Serenity trust account is able to minimse the impact of merchant risk as funds held in trust are protected from the financial failure of a merchant.