The Competition & Markets Authority (CMA) has widened an investigation into unfair refund policies to include package holidays.
The government body last month said it would examine concerns over cancellation policies across the hospitality industry.
With airlines and travel agents in some cases offering vouchers instead of the cash refunds consumers are legally entitled to, the body said it had seen increasing numbers of complaints related to the issue.
From March 10th to May 17th, the CMA said it had been contacted more than 60,000 times about coronavirus-related issues.
Between May 11th-17th, on average 1,200 people a day contacted the organisation.
Holidays and airlines account for three-quarters of the total number of complaints about cancellations and refunds, the CMA added.
Consumer watchdog Which? welcomed the move.
Rory Boland, editor of Which? Travel, said: “The CMA’s decision to include package holidays in the scope of its investigation into cancellations and refunds is a positive step, given the huge number of customers that are being left out of pocket by operators openly breaking the law on refunds.
“Many holiday companies also continue to push refund credit notes onto customers, without making it clear when they are legally entitled to a cash refund and with no assurance from the government that these are financially protected, further adding to confusion from consumers around if and when they will ever see their money again.
“The regulator must be ready to come down strongly against any package holiday provider unnecessarily delaying or denying refunds for cancelled holidays, to ensure that passengers have their money returned to them swiftly and trust in the industry is restored.”
Campaign group Right to Refund added that the move would be bad news for ABTA and many of its members who have been flaunting the law.
Kane Pirie, campaign leader with the group, commented: “We submitted a formal complaint to the Competition & Markets Authority on May 1st highlighting the conduct of ABTA and many ABTA members in positioning themselves as above the law.
“In many cases, customers have been told they must accept a refund credit note as per ABTA guidance - patent nonsense.”
He added: “We explicitly asked the CMA to investigate the treatment of customers seeking a refund on Covid-19 cancelled holidays and are delighted for the people that the CMA has now done exactly that.
“Whether ABTA recognise it or not, following the law is pro-business and pro-consumer.
“Hopefully, this day marks an end to the wild west and a return to sanity.
“We now expect refunds to flow as the missing billions are suddenly available.”