Holiday booking: Are you entitled on a refund deposit?

Holiday booking: Are you entitled to a refund deposit?

Can a company legally keep your whole deposit if you cancel a holiday booking, or a wedding reception, or whatever?

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Well, yes, and no.

If you cancel at the very last minute, and there’s very little chance they will be able to rebook someone in your place, well, then fair’s fair, you forfeit your deposit.

But thanks to the Consumer Protection Act, the CPA, companies can no longer have a blanket ‘no refunds’ policy pertaining to cancelled bookings.

As for how much can companies retain of your deposit or your full payment if you cancel, the CPA is incredibly non-specific on this, it just says that a company may charge a “reasonable” cancellation penalty, with a few pointers for working out what is reasonable in a particular case. 

The general rule is that whatever the supplier chooses to keep as a cancellation fee must be in proportion to the loss that they suffered.

And that they must have a sliding scale of deposit forfeiture in proportion to the notice given so the sooner the cancellation was made after booking, the greater the refund.

In other words, the more time the company has to get a replacement booking, the bigger the refund must be.

And if they do get another booking, they can only charge you an admin fee based on their actual out-of-pocket costs.

And here’s something to remember - according to the CPA, suppliers can be asked to show what their direct losses and costs incurred due to the cancellation, including time spent with you, and a portion of the marketing and admin costs. 

In other words, they can’t just thumb suck an amount.

Sharon Chetty's holiday booking 

Which brings us to the case of Sharon Chetty of Pietermaritzburg. On February 16, she booked an Italian cruise with UK-based Imagine Cruising for her and her Jo’burg-based sister, scheduled to depart on July 18. The cost was just over R20 000 each, including flights.

Sharon paid her R20 000, which was accepted as a deposit on the booking for both of them.

But three days later, Sharon cancelled the booking as her sister was no longer able to join her, and she was horrified to learn that she wouldn't be getting a cent of her deposit back, despite qualifying for Imagine Cruising’s most generous refund - 50% of the total booking cost.

So I wrote to Imagine Cruising, arguing that withholding Sandra’s entire R20 000 deposit, given that she’d cancelled just three days after she’d booked, was not reasonable.

Responding, Imagine Cruising director Peter Shanks said the company had worked with its suppliers to reduce its actual costs in making flight and hotel bookings, to R9750, and thus they would be happy to refund Sandra R10 460.

But then a wonderful thing happened. I received an email from Imagine Cruising, with cruise offers. An unsolicited email, also known as spam. Where they got my email address from is a separate issue.

But it’s what is called direct marketing. And the CPA gives we consumers a five-day cooling off period if we buy something as a result of direct marketing.

So I quizzed Sharon about how she came to book that cruise, something I hadn’t thought to ask her before.

She told me she’d got an email - one of many - from Imagine Cruising with the cruise offer.


Consumerwatch's Wendy intervenes 

So I went back to Imagine Cruising director Peter Shanks, to say that actually, Sharon was owed a full refund of her R20 000. I also forwarded emails from Imagine Cruises, with that specific Italian cruise offer, which were sent to Sharon before she made the booking.

Shanks said he didn't have the booking logged as a response to direct marketing, but rather as a Google enquiry.

“We do comply with the CPA provision of a five-day 'cooling off' period for Direct Marketing," Shanks said. “We have only had one such request in the last 18 months.

“On checking our records we have sent direct marketing communications to Sandra Chetty in the past. Whilst we did not have this booking tracked as a response to direct marketing, we are prepared to waiver the loss of deposit on this occasion as the cancellation was only three days subsequent to the booking and it could be that previous direct marketing had influenced the decision to book.

"We have now responded to Sandra Chetty with a full refund of the deposit paid.”

Sandra, as you can imagine, is thrilled with the outcome.

Bottom line

If you buy anything as a result of direct marketing - SMS, email, phone call, or being stopped in a mall and asked to try out a product you get five days - five business days - in which to cancel, in writing, for a full refund. You don’t need to give a reason - you simply get to change your mind.

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