Train operators have been profiting on refund fees

THE Office of Rail and Road has revealed that train operators have been charging up to twice their actual costs when levying a fee for refunding unused tickets.

The ORR said the average fee, when charged, has been estimated at £6.96, but the real average cost of handling a claim has been put at £3.77, suggesting a potential profit of £3.19 for each transaction. The regulator had been asked by the DfT to examine the figures.

In the 12 months from 1 April 2019 341 million tickets were issued and 5.8 million were refunded. In that year 28 per cent of the possible fees were waived, bringing the average fee charged down to £4.64. Even so, operators would still have been making about £2.32 each time, suggesting a potential profit of some £13.5 million altogether.

The ORR added that the admin fee for refunds is presently capped at £10, but when operators have charged the maximum their actual costs were still less than £5.

The industry’s Ticketing and Settlement Agreement requires operators’ fees to be based on an assessment of costs, and the ORR wants the operators to do their sums again. It is also in discussions with the Rail Delivery Group and the Department for Transport about whether the £10 cap should be reduced.

The ORR’s deputy director for consumers Stephanie Tobyn said: ‘With 92 per cent of refund claims now submitted electronically and almost all refunds paid out by bank transfer or card payment, we’re asking retailers to assess whether their administration fees for ticket refunds are cost-reflective and reasonable.

‘We are working with DfT and the Rail Delivery Group to ensure these findings are taken into account when considering whether the maximum caps for administration fees, particularly the current £10 cap in respect of ticket refunds, should be lowered.’

Rail minister Wendy Morton has welcomed the report and said she will be ‘working closely’ with the Rail Delivery Group to review its findings, while the RDG’s CEO Jacqueline Starr said: ‘Since the pandemic, train operators have refunded £334 million worth of tickets to passengers, with the vast majority of claims now submitted digitally. We want to make it as easy as possible for customers to claim their refund and we support the work of our partners to ensure that the refund administration fee is cost reflective so that more of the refund goes to the customer.’