The class action lawsuit is seeking millions of dollars in refunds and compensation for customers who had flights cancelled.

Echo Law filed the lawsuit in the Federal Court on Monday, alleging the airline misled customers about their refund options, withheld funds, and engaged in a “pattern of unconscionable conduct”.

The action comes one month after Qantas launched a campaign to encourage customers to use the remaining $400 million in flight credits held by the airline, and after Australia’s consumer watchdog indicated its probe into the issue was almost complete.

Backed by litigation funder CASL, the lawsuit alleges Qantas breached Australia Consumer Law by failing to immediately issue refunds when flights were cancelled in 2020 and by retaining customers’ funds.

Echo Law partner Andrew Paull said Qantas initially only offered customers access to use “travel credits with strict conditions” rather than returning their payments.

“We allege Qantas breached the law by failing to be transparent and immediately issue refunds to customers when flights were cancelled,” he said.

“While COVID posed major disruption to air travel and resulted in cancellations that no airline wished to make, that is no excuse for Qantas to take advantage of its own customers and effectively treat them as providers of over $1 billion in interest-free loans.”

Paull said some Qantas customers had been forced to spend more money with the airline to use their original flight credits, while others may not be able to use the credit before it expired on December 31, 2023.

“While Qantas has talked in recent weeks of giving customers the option of requesting a refund, this is both too little and too late,” he said.

“That money ought to have been automatically returned to customers, in most cases more than three years ago, and we are seeking both refunds of all remaining credits as well as compensation for the time customers have been out of pocket.”

Qantas has extended the expiry date on travel credits issued in 2020 three times, and in July launched a campaign to encourage customers to find and use flight credits from 2020.

The airline said it held about $400 million in COVID-era credits and more than $1 billion had been claimed by Qantas and Jetstar customers.

Qantas chief customer officer Markus Svensson said many travel credits were for between $100 and $500 and could be located using an online tool.

“We’ll keep reaching out directly to customers, particularly ahead of these credits expiring at the end of this year,” he said.

The Australian Competition and Consumer Commission is also investigating Qantas’ handling of credits and refunds after issuing a warning to the airline in 2020 and receiving a complaint from consumer group Choice in April 2022.

The airline has been contacted for comment.

-AAP