The Competition and Markets Authority (CMA) has written an open letter to the sector to remind firms of their legal obligations and of the need to ensure refund options are clear and accessible.
It is sending a copy directly to the 100 package travel companies that have attracted the most complaints.
The watchdog said Tui UK had given a formal commitment – known as “undertakings” – to provide clearer information on refunds upfront to customers whose holidays have been cancelled due to coronavirus.
Since March 2020, the CMA has received more than 23,000 complaints from consumers about refund issues relating to package holidays that could not go ahead due to the pandemic.
In its letter, the CMA sets out what businesses should provide and what customers can expect, including that holidays cancelled by package holiday companies must be refunded within 14 days under the Package Travel Regulations (PTRs).
Any offer of a refund credit note must be accompanied by the option of a full refund. Customers should be able to exchange their credit note for a refund at any time.
Customers have the right to a full refund where they decide to cancel their package because unavoidable and extraordinary circumstances at the destination significantly affect the holiday they have booked or their travel there.
The letter also says that if the Foreign, Commonwealth and Development Office is advising against travel to the package holiday destination when the consumer is due to leave, that is, in the CMA’s view, strong evidence that these unavoidable and extraordinary circumstances are likely to apply.
It advises that if the consumer is refused a full refund, the package holiday company should fully explain why it disagrees that the holiday or travel is significantly affected.
CMA chief executive, Andrea Coscelli, said: “International travel is set to resume soon and lots of people will be considering a long-awaited trip abroad.
“With that in mind, we want to make sure people are fully aware of their refund rights, so they can make informed choices about booking a holiday.
“We’ve secured millions in refunds for people who couldn’t go on their hard-earned trips over the past year and now we’re calling on package holiday companies to make the refund process less hassle in the future. We expect all firms to give clear cancellation options and will consider appropriate steps if we see companies breaking the law by refusing or delaying refunds this summer.”
Previous CMA action against five major package travel companies has provided more than £200 million in refunds for customers.
Rory Boland, editor of Which? Travel, said: “With international travel set to resume, we must not see a repeat of the fiasco that took place last year, which saw some travel firms break the law by withholding refunds from customers for months after their trips were cancelled.
“Earlier this month Which? revealed that some of the UK’s largest holiday companies were suggesting they may break the law again this summer. It’s encouraging that the regulator has set out its expectations of firms, and it must take strong action quickly against operators that drag their feet on refunds or mislead customers over their rights.
“Travellers considering a holiday this year should only book with companies that guarantee in their flexible booking terms that they will be able to give full refunds if a country is moved from the green list to amber, or if lockdowns, quarantine or other disruption prevents them from travelling.”