Your rights when travel companies fail

More than 100,000 people have been left out of pocket by the collapse of travel company LowCostHolidays.

Many customers have been forced to pay out thousands of pounds to rebook hotels, while others have had to give up their holidays altogether because they cannot afford to pay again for their accommodation.

Worse still, a lot of those affected look set to receive almost no compensation.

We explain what happens when travel companies go bust and offer advice on how to get your money back.

What happens when a tour operator goes bust

The collapse of a travel booking firm can result in you losing your flights, your accommodation and/or other services such as transfers from the airport and pre-booked excursions.

Most of those hit by the collapse of LowCostHolidays, for example, can still take their flights because the company has already paid for them.

However, as websites of this kind generally pay for hotel rooms after the event, many people are being forced to pay again or lose their bookings.

Ways to get your money back

*ATOL protection
The Air Travel Organiser's Licence (ATOL) is an industry-funded scheme designed to protect people booking packaged holidays in the event that the firm goes bust.

Almost all the big travel firms operating in the UK are part of the scheme, meaning their customers who book package trips and flight/hotel booking reservations can apply to the Civil Aviation Authority for a full refund.

But annoyingly for LowCostHolidays customers, the company gave up its ATOL membership when it moved its head office from the UK to Majorca in 2013, signing up instead to a local scheme that provided much less protection.

*Section 75
Section 75 of the Consumer Credit Act states that credit card firms are jointly liable with retailers if something goes wrong.

If you pay for a holiday with a credit card, and it costs more than £100, you may therefore be able to get a refund from the card provider.

*Chargeback schemes
Visa, Mastercard and Amex credit cards offer "chargeback" protection, with which they get your cash back from the retailer's bank if something goes wrong.

HSBC, RBS, Barclays, Halifax and Lloyds have confirmed they will offer the chargeback scheme to Lowcostholidays customers.

However, you usually have to claim within 120 days of the holiday start date to benefit, according to the Financial Ombudsman Service.

*Paypal buyer protection
PayPal has said that LowCostHolidays customers will be covered by its buyer protection scheme.

You must raise a dispute within 180 days of paying to take advantage of the scheme.

*Travel insurance
You may be able to make a travel insurance claim if a company's collapse leaves you out of pocket.

However, many policies won't cover you unless you have paid extra for travel firm failure cover.