What's the real deal with 'non-refundable' deposits?


27 days ago

Picture the scene. You and your fiance book your dream venue at which to hold your post-nuptial celebrations.

There are 13 months to go until the big day and you agree to pay the 50% deposit over the course of the next three months.

You initially hand over a not unsubstantial R14,800, but 18 days later you need to cancel the booking.

You send the venue manager an email informing them of the cancellation, leaving them more than a year to find a replacement booking.

But instead of receiving your R14,800 back, you are pointed to the venue's cancellation policy.

"If the function is cancelled from the date of your initial confirmation booking payment up to 60 days prior to the date of your function, a cancellation fee charge of 50% of the total function cost of invoice presented will be applicable, and charged to the customer.”

That was Jethro Nair's experience. He was refunded only half of his R14,800 for a booking he'd made just three weeks earlier.

Understandably aggrieved, Jethro got in touch with consumer journalist Wendy Knowler for some expert advice.

Knowler says while many service providers include them in their contracts, blanket “non-refundable deposit” policies are, in fact, illegal under the Consumer Protection Act (CPA).

The CPA allows consumers to cancel an advance booking of any kind and get a refund of what they’ve paid, but there’s a catch - minus a “reasonable” cancellation fee. And quite right - service providers’ interests need to be protected, too.

Wendy Knowler, Consumer journalist

Knowler says the rule of thumb should be that the greater the likelihood of the venue being able to find a booking to replace the cancelled one, the bigger the refund should be.

Hotels, wedding venues, photographers, accommodation venues, in particular, should spell out their policies to whoever is paying in writing... in the form of a sliding scale of refunds, from 100% in the case of an immediate cancellation, down to zero for a very last-minute one.

Wendy Knowler, Consumer journalist

So how was Jethro's case resolved?

I pointed out to the venue that that was not consistent with the Consumer Protection Act.

Wendy Knowler, Consumer journalist

Responding via an attorney, the venue agreed to refund substantially more, withholding a “nominal” amount to cover the “considerable time liaising with Jethro and planning the wedding with him”.

And there was no word on the cancellation policy itself.

Wendy Knowler, Consumer journalist

Wendy has the following message for service providers:

The paying of a deposit is meant to offset any losses related to a booking cancellation; it is not intended to enrich you... you can’t just thumb suck the amount - you are required to substantiate it, revealing what it covers in terms of your time or any financial costs.

Wendy Knowler, Consumer journalist

And these final words of advice for consumers:

Before you pay in part or in full in advance for a holiday or a function, make sure you know what the terms of that upfront payment are should you decide to cancel.

Wendy Knowler, Consumer journalist

Listen to the full interview below:

This article first appeared on CapeTalk : What's the real deal with 'non-refundable' deposits?

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