The cost of a rail ticket refund

Tuesday 15th March 2022

I’ve been ‘off the road’ for operational reasons since last Monday (otherwise known as testing positive for Covid) which has given me an opportunity to reflect on the rail industry’s policy on ticket refunds.

It’s all very simple if you’re a Marks & Spencer customer. Famous for its no quibble policy, the store commits to a full refund within 35 days “if the item is in its original packaging and accompanied by a valid proof of purchase”. Can you imagine M&S charging a £10 administration fee when you return an unopened pack of medium size Y-fronts because you meant to buy large size?

Yet it’s standard practice for train companies to impose a £10 administrative charge for refunding an unused rail ticket prior to its departure date. Why?

It’s not as though it costs anything like £10 to process a refund. A review published last month by the Office of Rail and Road (ORR) concluded the average cost of processing refunds is less than half that amount.

Whatever the administrative cost, charging a passenger for a refund is as far removed from being ‘customer led’ as you can get so to profit out of the process reflects very badly on the railways indeed. It does nothing to encourage passengers.

To their credit train companies are currently waiving the £10 fee for changing or cancelling Advanced tickets as an encouragement to entice passengers back to rail travel but this concession only lasts until the end of this month after which I assume the £10 fee will be back.

Why doesn’t the rail industry surprise us all and show it’s serious about wanting a positive relationship with passengers by cancelling the 31st March deadline and commit to permanently allowing amendment or cancellation of tickets purchased in advanced and not used due to changed plans?

It’s not all bad though, and a big shout out to James at LNER Customer Services who sorted out a refund for me on Friday with the minimum of fuss proving to be an exemplar in good customer service.

I had Advanced tickets worth £71.20 purchased a while ago for a journey last Thursday with LNER so due to the need to self isolate on Tuesday followed the instructions by completing a form on the company’s website – where I’d booked – to obtain a refund, or what I thought might be a travel voucher of equivalent value, something mentioned on the website as well as on others including Avanti, GWR etc.

Being a traditionalist I’d opted for collecting tickets from a ticket machine for my journey which I’d already done and as it occurred to me, come Friday, LNER wouldn’t have had proof I hadn’t made the journey the previous day, I gave LNER a call to see what the score was. After the usual press this for that and that for this etc intro, an impressively quick answered phone (no “high call volume” being experienced) saw James do the business; got me to send a photograph of the cut up tickets and positive lateral flow test result and a £71.20 refund was on its way back to my credit card – not even a travel voucher. That was impressive and thanks LNER and James in particular.

So why not make it a permanent arrangement? I appreciate some may choose to game the system and book Advanced tickets well ahead to get good prices with only a vague intent on travelling, knowing they can cancel nearer the time and cause administrative headaches, but that could be sorted by imposing appropriate conditions or minimums. In any event, the huge disparity between Advanced ticket prices and buy-on-the-day tickets needs sorting too, as covered in a recent post.

The ORR’s recent report was “based on data from train operators and third-party retailers spanning 12 months from 1 April 2019 to 31 March 2020, when 341 million tickets were issued, of which 5.8 million were refunded”. That’s 1.7% of tickets (one in 59) issued. ORR worked out the estimated average cost of processing a refund at £3.77 but as some fees were waived during that twelve month period, the cost spread over a smaller number of passengers being charged £10 worked out at £4.64 – still less than half the amount passengers had to cough up.

The Ticketing and Settlement Agreement to which all train companies comply states “an administration fee must reasonably reflect the cost of processing the refund application and where an operator charges a fee it should be the same for all transactions of that type” – Section 6-49, paragraph 4.

In practice ORR’s survey showed variations in what different train companies and retailers actually charge. Trainline, for example, has a tiered policy with refunds on the lowest value tickets (below £2) attracting no fee with the maximum £10 charged on fares of £15 and over. ORR say 28% of potential administration fees were waived during 2019/20.

The overwhelming majority of claims (92%) in 2019/20 were made electronically with 6% made by post and 3% in ticket offices. Almost all (94%) were paid out by card payment. As you can see claims can be dealt with efficiently and remotely using electronic processes and thereby minimising costs.

Come on railway people, the ORR survey shows you can use your discretion to waive the fee why not really show “passengers are at the heart of everything we do” and abolish the £10 administrative fee once and for all. M&S would.

Roger French

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Next blog, Thursday 17th March 2022: TfL’s Bus Action Plan.