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Smooth landing for holiday refund dispute

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Covid-19 cancellations have cost millions of families dearly. They have been refused cash from holiday companies and airlines. They have been denied compensation from travel insurers. Many have battled for months with credit card companies to receive compensation under section 75 of the Consumer Credit Act 1974.

For evidence of this, look no further than last week’s announcement by the Competition and Markets Authority that it had secured agreement from Virgin Holidays to refund customers for holidays cancelled because of coronavirus, amounting to £203m in repayments. The CMA said it received hundreds of complaints from customers not receiving refunds or being told they had to wait 120 days for the money back.

As well as the CMA, the Financial Ombudsman Service has become an option for frustrated consumers. It has had an upsurge in complaints about credit cards failing to pay compensation for cancelled holidays and concerts.

However, it is possible for customers seeking redress to go it alone by making a Money Claim Online — an internet-based service offered by HM Courts and Tribunals to allow you to claim money you think you are owed by an organisation or person — whether travel companies, builders or online retailers.

One FT reader, the chairman of a stockbroking firm, decided to do this when his £18,400 Club Med skiing holiday was cancelled. He and 11 members of his family had booked to go skiing in April 2020. He was offered vouchers to book an equivalent holiday but they had to be used by the end of 2020.

He was initially referred to customer services. It replied saying that Abta, the travel association, advised holiday companies to provide vouchers, and that cash refunds were not their priority at that time. He rightly pointed out that if a package holiday was cancelled, a refund should be provided for the whole holiday within 14 days.

He decided to issue proceedings against Club Med by making a Money Claim Online to the civil court using the N1 form on the Ministry of Justice website. He paid a fee of £830, which was 4.5 per cent of his claim.

“It was very easy and very efficient,” he said. “I had sent a ‘without prejudice’ email on April 19 saying I would be issuing proceedings after I received an email from Club Med stating: ‘Unfortunately, refund is not an option due to the severe impact that is causing the Covid-19 outbreak on all the travel industry.’”

He said he probably would not have made a court claim against a small travel business that could not afford to pay a refund, but Club Med is owned by Fosun, a multibillion-pound company.

He asked Club Med for a cash refund under the Package Travel and Linked Arrangement 2008 regulations, but was told: “At this stage Club Med is issuing only credit to all Club Med membership accounts. This credit will be valid until December 31 2020 to rebook a holiday.” The holiday would have to be taken before April 2021.

Credit conundrum

Different family members had made bookings for the ski trip at different times using his American Express credit card. So, before taking court action he had asked Amex for a refund under the Consumer Credit Act. He made claims for each of the bookings, totalling £18,400. On May 21 Amex rejected the first of these because a voucher had been issued by Club Med.

It said Club Med had provided the refund credit note, which meant no refund was due. He assumed that all the other section 75 claims for individual bookings would be rejected, since vouchers had been offered for each. Amex noted that he could refer his complaint to the Financial Ombudsman Service within the following six months. 

But he decided to make the court claim. “I assumed the [credit card claims] would all be rejected, although two credits to my account had been made, without my knowing. I issued proceedings against Club Med on May 23. I was prepared to risk the fee as I knew I had a good case.” He claimed for the full £18,400 costs plus the £830 court application fee.

The travel company had 14 days to acknowledge the proceedings and to file a defence. He then gave his response.

“It was straightforward. I did not need a solicitor,” he said. Club Med agreed a settlement on July 28 and paid on August 7, including court fees.

He added: “The moral is clear: do not hesitate to both threaten and take legal action especially if the amount is under £10,000, as you don’t have any risk of costs awarded against you. Yes, you do risk losing the court fees but if you are confident in your position it’s worth taking the risk.”

To make a claim, you need to establish that you have a genuine grievance and financial loss and that the other party has the means to pay. 

Costs to pursue a case online start at £25. For paper-based claims it is £35 for claims up to £300. The fees rise in line with the claim size, up to 5 per cent of a claim for £100,000 to £200,000. You may also be able to claim back the fees if you win the case, but a judge may refuse to award costs if he or she thinks you have made no effort to agree out of court. Most plaintiffs put their own case forward.

For claims under £10,000 in England and Wales you will be asked to use the small claims mediation service. The limit in Scotland is £5,000 and in Northern Ireland it is £3,000.

Claims surge

Estelle Giraudeau, UK managing director at Club Med, said the business was receiving an “unprecedented level of inquiries”.

“We are currently processing all requested refunds by chronological order and are committed to refunding within a maximum of 60 days,” she said. “Wherever possible, we are trying to process these faster. We are kindly asking our customers to be patient and bear with us as we work through the bookings, but we are making progress and beginning to catch up.”

Amex said it could not comment on the specific case but said in a statement: “We would like to assure all our card members that our process is to review all refund claims carefully and fairly, on a case-by-case basis. At any point during this process, if a card member receives a refund from the merchant, we will take this into consideration.”

The Financial Ombudsman Service handles complaints from credit card customers who have not been able to get compensation from the card company under Section 75 of the Consumer Credit Act 1974. Credit card companies are jointly responsible with the retailer or trader for goods or services that have not been supplied.

Grounded planes at the start of the coronavirus lockdown in March © Getty Images

So far, the service has had more than 300 complaints about Section 75 and chargeback claims that are related to Covid-19. 

Martyn James of Resolver, the free online complaints service, said more complaints were arising where refunds were declined as vouchers were on offer.

This was often compounded by the group nature of bookings, he added. “If lots of people book for a collective holiday but pay separately, they have separate claims and this can produce different results depending on the card provider.”

Lindsay Cook is the co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor to look into, email money.mentor@ft.com



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Chancellor spots break in clouds after Brexit, Covid and battered finances

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Rishi Sunak will next week deliver a Budget in the shadow of a pandemic, in the aftermath of Britain’s painful divorce from its biggest trading partner and with its public finances, on his own account, under “enormous strains”.

But the chancellor, in an interview with the Financial Times, insisted he can see a brighter future and that his second Budget since being appointed last February will help to build a “future economy” characterised by nimble vaccine and fintech entrepreneurs.

Sunak supported Brexit and now has to show it can work. He knows he cannot expect much help from the EU, which has shown no appetite for opening its markets to the City of London, but still insisted Brexit is an opportunity.

He said post-Brexit Britain would be an open country. “It’s a place driven by innovation, entrepreneurship, taking the agility we have after leaving the EU and putting that to good ends, whether in vaccines or fintech,” he said.

Sunak’s Budget on Wednesday will attempt to flesh out the government’s “build back better” slogan; Britain’s successful vaccine scientists and scrappy tech start-up twenty-somethings will be the poster children of this new approach.

While big and profitable companies are expected to face a hefty increase in their corporation tax bills — part of Sunak’s drive to restore fiscal discipline — the chancellor will focus on companies for whom a profit is a distant dream.

On Friday he told the FT he would launch a new fast-track visa scheme to help Britain’s fastest-growing companies recruit highly skilled workers, as part of a drive to build an “agile” post-Brexit economy.

He said he wanted to help “scale up” sectors such as fintech to compete for the best global talent. The new visa system, he added, would be “a calling card for what we are about”.

Next week Sunak will publish a report by Lord Jonathan Hill, Britain’s former EU commissioner, on the City of London’s listings regime, to make it more attractive for fast-growing tech companies.

“We want to make sure this is an attractive place for people to raise capital — we’ve always been good at that,” Sunak said. “We want to remain at the cutting edge of that.”

The chancellor confirmed Hill will look at whether London can be a rival to New York as a location for so-called Spacs, the modish blank-cheque vehicles that hunt for companies to buy and take public.

He declined to speculate on what Hill will recommend, but gave a broad hint he supports radical reform. “Do we want to remain a dynamic and competitive place for people to raise capital? Yes we do,” he said.

The loss of some City business, including EU share trading, to Amsterdam has reinforced criticism of the government over its negotiation of a trade deal that focused heavily on fish, but hardly at all on financial services.

Last summer the Treasury filled in hundreds of pages of questionnaires from Brussels about its regulatory plans for the City but Britain is still waiting for a series of “equivalence” rulings that would allow UK firms to trade with the single market. It could be a long wait.

When Emmanuel Macron, French president, was asked this month by the FT if he was in favour of Brussels granting “equivalence” to UK financial services rules, he replied simply: “Not at all. I am completely against.”

Sunak insisted he has not given up and that the Treasury remained “constructive and open” in talks with Brussels. But he added: “We live in a competitive world. It’s not surprising other people are looking after their interests.”

Sitting in his sparse Treasury office, stripped of any clutter, wearing his trademark bright white shirt, Sunak said: “We just need to focus on what we’re in control of. I’m enormously confident about both the future for the City of London and, more broadly, financial services.”

At the age of 40, Sunak is only just a year into the job. “When I got the job I had three weeks to prepare a Budget,” he recalled. “I genuinely thought at the time it would be the hardest thing professionally I would have to do in my life.” But that was before the full-blown pandemic hit the UK.

“That Budget turned out, probably, to be the easiest thing I did in my first year in the job. It has been a tough year, dealing with something that nobody has had to deal with before. There was no playbook. We had to move at speed and scale.”

His critics argue that handing out £280bn of borrowed money to support the economy may not have been that difficult either — Sunak’s approval ratings remain very high — and that the really difficult bit is yet to come: trying to rebuild the economy and the tattered public finances.

Conservative MPs are anxious that Sunak’s innate fiscal conservatism might lead him to make unwelcome raids on the finances of core Tory voters and businesses, just as the economy starts to reopen.

The chancellor is expected to freeze income tax thresholds, pushing people into higher tax bands as their pay rises. Another “stealth” move — freezing the lifetime pensions allowance at just over £1m for the rest of the parliament — was reported in the Times on Friday and not denied by the Treasury.

And all the while Sunak will carry on running up debts into the summer to protect the economy from what he hopes will be the last Covid-19 lockdown. He said he is “proud” of what the support measures have achieved so far.

“I’m going to keep at it,” he said. “Some 750,000 people have lost their jobs and I want to make sure we provide those people with hope and opportunity. Next week’s Budget will do that.”



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‘Digital big bang’ needed if UK fintech to compete, says review

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Sweeping policy changes and reform of London’s company listing regime will spark a “digital big bang” for the City and turbocharge the UK’s fintech industry, according to a government-commissioned review.

The report, to be published on Friday, warns that the UK’s leading position in fintech is at risk from growing global competition and regulatory uncertainty caused by Brexit

The review, carried out by former Worldpay chief Ron Kalifa, is one of a series commissioned by the government to help strengthen the UK’s position in finance and technology.

Both sectors are under greater threat from rivals since the UK left the EU in January amid growing global competition to attract and retain the fastest growing tech start-ups. 

Changes to the UK’s listing regime are recommended, such as allowing dual-class share structures to let founders maintain greater control of their companies after IPO. The review also proposes a lower free-float threshold to allow companies to list less of their stock.

Kalifa said the rapid evolution of financial services, from online banking and investment to digital identity and cryptocurrencies, meant that the UK needed to move quickly.

“This is a critical moment. We have to make sure we stay at the forefront of a global industry. We should be setting the standards and the protocols for these emerging solutions.”

John Glen, economic secretary to the Treasury, said more than 70 per cent of digitally active adults in the UK use a fintech service “but we must not rest on our laurels . . . all it takes is a bit of complacency to slip from being a leader of the pack to an also ran”.

He said the government would consider the report’s recommendations in detail. 

The review was welcomed by executives at many of the UK’s largest fintechs and leading financial institutions such as Barclays. Mark Mullen, chief executive of Atom Bank, said the review was “essential to maintain momentum in this key part of our economy and to continue to drive better — and cheaper outcomes for all of us”.

The review also recommended the government create a new visa to allow access to global talent for tech businesses, a move likely to be endorsed by ministers as early as next week’s Budget, according to people familiar with the matter.

Fintechs have been lobbying for a visa scheme since shortly after the 2016 Brexit vote, but the success of remote working since the onset of the coronavirus crisis has reduced its importance for some firms.

Revolut, for example, has ramped up its hiring of fully remote workers in Europe and Asia to reduce costs and widen its potential talent pool, according to chief executive Nik Storonsky.

Charles Delingpole, chief executive of ComplyAdvantage, a regulatory specialist, agreed that fintech was becoming more decentralised. He added that the shift in tone from the government could have as big an impact as specific policy changes. “Whilst none of the policies is in itself a silver bullet . . . the fact that the government recognises the threat to the fintech sector and is publicly acting should definitely help.”

The review also proposed a £1bn privately financed “fintech growth fund” that could be co-ordinated by the government. It identified a £2bn fintech funding gap in the UK, which has meant that many entrepreneurs have in the past preferred to sell rather than continue to build promising companies. It wants to make it easier for UK private pension schemes to invest in fintech firms. 

The report also recommended the establishment of a Centre for Innovation, Finance and Technology, run by the private sector and sponsored by government, to oversee implementation of its recommendations, alongside a digital economy task force to align government efforts.

The review has identified 10 fintech “clusters” in cities around the UK that it says needs to be further developed, with a three-year strategy to support growth and foster specialist capabilities.

Dom Hallas, executive director at the Coalition for a Digital Economy (Coadec), said it was now important that people “follow through and actually implement” the ideas in the review. The sector’s direct contribution to the economy, it is estimated, will reach £13.7bn by 2030.

However, the review also raised questions over the role of the Competition and Markets Authority, saying that the CMA should better balance competition and growth. 

“There is a case for more flexibility in the assessment of mergers and investments for nascent and fast-growing markets such as fintech,” it said. 

“Success brings scale but as some businesses thrive, others inevitably will fail. Some consolidation will therefore be critical in facilitating the growth that UK fintechs need in order to become global champions.”

Charlotte Crosswell, chief executive of Innovate Finance, which helped produce the report, said: “It’s crucial we act on the recommendations in the review to deliver this ambitious strategy that will accelerate the growth of the sector.

“The UK is well positioned to lead this charge but we must act swiftly, decisively and with urgency.”



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Coinbase: digital marketing | Financial Times

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Coinbase will be a stock riding a runaway train. The US cryptocurrency platform wants investors to think long term about the prospects for a global “open financial system”. Most will be unable to tear their eyes away from wild, short-term price swings in bitcoin, the world’s largest digital asset. 

This has its benefits. Coinbase, which has filed for a US direct listing, makes most of its money from commissions on crypto trades. Sales more than doubled to $1.3bn last year. The company has swung from a loss to net income of $322m as crypto prices jumped.

But the company has given no detail on the financial impact of the 2018 bitcoin price crash. Will Coinbase’s 2.8m active retail users and 7,000 institutions hang on if there is another protracted price fall? 

Coinbase was valued at $8bn in a 2018 private funding round and $100bn in a recent private share sale, according to Axois. That rise looks remarkably similar to the increase in bitcoin’s price from less than $5,000 to more than $50,000 this year.

The rally is hard to justify. Bitcoin has not become a widely used currency — nor is the US ever likely to countenance that. It offers investors no yield. Volatility remains high. Elon Musk’s tweet this weekend that bitcoin prices “seem high lol” propelled a sharp fall that hit shares in crypto-related companies. Shares in bitcoin miner Riot Blockchain have lost a quarter of their value this week. 

Prospective investors in Coinbase should keep this in mind. Its listing will take cryptocurrencies further towards the financial mainstream. But risk factors are unusually numerous, including the volatility of crypto assets and regulatory enforcement. 

Both threats are widely known. Another risk factor in the listing document deserves more attention. Vaccination campaigns and the reopening of shuttered sectors of the economy is raising yields in safe assets such as Treasuries. Risky trades may become less attractive. Coinbase might be about to go public just as the incentive to trade cryptocurrencies is undermined. 

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