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Lochiel Fraudulant Hotel near Melbourne warning to fellow travellers

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Bookiers be warned! Lochiel Luxury Accomodations displayed fraudulent behavior in their attempt to make a few [free] dollars. I made every attempt to give this hotel an opportunity to redeem themselves before posting this. Unfortunately, instead, they proved to continue fraudulent behavior.

Facts:
Booked this accommodation online on 02/12/14 for one night checking in on 3/28/14.
This booking has a clear cancellation policy of 'Free Cancellation if cancelled prior to 3/27/14'.
Cancelled this reservation on 2/18/14 (40 days before the cutoff). Received the cancel confirmation with it clearly stated that I owed $0.
40 days later on 3/27/14, I noticed the hotel itself charged me $324.63. (this is 1 day prior to my original cancelled check in)
I first called the hotel directly since that is who charged my card. Spoke with Johnathon (no last name) at hotel who told me that in his eyes I no-showed and that he would not consider the fact that I cancelled per the free cancellation guidelines 40 days earlier. (I have all documentation)
He told me that he would not consider my case, NOT refund my money and that I should call Hotels.com. After pressing the matter, he said that he would contact the booking site.
After a few days of trying to contact them, they marked my emails SPAM so that they no longer received my emails.
I have clear documentation showing that I booked and cancelled and that I should have incurred no charge.
Summary:
If the hotel and booking site have internal issues (not sure if this is the case here), that should not impact the end customer.

I find Johnathon's statement of me no-showing a giveaway, since the charge hit my card before my original check in date. I guess he figures if he does this to enough of us, maybe the owners can renovate.
Terrible.

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