The Competition & Markets Authority is to launch an investigation into 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.
Such vouchers can often only be used during a more expensive period.
The topic now accounts for four out of five complaints being received by the Covid-19 taskforce, which monitors market developments and identifies the big problems facing consumers, the CMA said.
Andrea Coscelli, chief executive of the CMA, said: “Alongside price-gouging reports, we are now seeing cancellation issues in their thousands.
“So far, the CMA has identified weddings, holiday accommodation and childcare as particular areas of concern.
“The current situation is throwing up challenges for everyone, including businesses, but that does not mean that consumer rights can fall by the wayside.
“If we find evidence that businesses are failing to comply with consumer protection law then we will get tough – that means launching enforcement cases and moving to court action where there is a strong reason to do so.”
The CMA acknowledged that most businesses are acting reasonably in what are unprecedented circumstances, and the current crisis is placing everyone under pressure, but said consumer rights cannot be ignored.
If it finds evidence that companies are failing to comply with the law, the CMA added it would take appropriate enforcement action, including moving quickly to court if a firm does not address its concerns.
Individuals can also take their own legal action against unfair terms should they choose to.
Commenting on the move, Adam French, Which? consumer rights expert, said: “We’ve heard from many distressed people who risk being left out of pocket for significant sums of money as they struggle to get refunds for cancelled weddings, private events, or holiday accommodation.
“It’s right the CMA investigates sectors that are skirting their legal responsibilities on refunds and cancellations by trying to rely on unfair and unenforceable terms and conditions.
“The regulator must be prepared to step in and take strong action against any businesses found to be breaching consumer law and taking advantage of consumers during these unprecedented times.”
The Civil Aviation Authority also welcomed the decision.
Commenting, Matt Buffey, head of consumer protection at the organisation, said: “We welcome the investigation from the Competition & Markets Authority into cancellation rights and refunds and the statement on its view of how consumer protection law applies.
“We will continue to work alongside the CMA on this issue as it progresses.
“We expect airlines to provide refunds for cancelled flights as soon as practically possible.”