More than 100 holiday companies have been told to speed up their refunds policy for coronavirus cancellations.
The Competition and Markets Authority (CMA) has received more than 17,500 complaints from people whose holidays have been hit by the virus.
In an open letter from the CMA, companies have been reminded of the 14-day refund rule for cancellations.
Travel firms say this has been an unprecedented crisis that put many of them on the brink of collapse.
By law, if a package holiday is cancelled by the provider, then a refund should be provided for the whole holiday within 14 days.
Many thousands of getaways were cancelled during lockdown, when the Foreign Office advised against all but essential travel outside of the UK.
The CMA said its investigations found that some businesses may not have been giving these legally-required refunds.
Other problems included:
- Holidaymakers only being offered a voucher for future travel, rather than a full refund
- Customers losing their deposits or being charged cancellation fees
- Companies misleading customers about their rights
- People finding it difficult to contact travel companies or to claim refunds
In the letter, CMA director Cecilia Parker Aranha said the regulator recognised the "extraordinary pressures" faced by the sector.
"Although we were sympathetic to the challenges faced in the early days of the pandemic, it is nonetheless important that businesses comply with consumer law," she added.
A spokeswoman for Abta, which represents the package holiday sector, said the pressures were continuing and that many companies, with loyal customers, had mutually agreed to a rebooked holiday rather than a refund.
She said Abta had conducted its own investigations of members when customers had been misled.
However, she added that package holiday companies were themselves facing delays from airlines in refunding them the flight element of any holiday.
"Many airlines, in particular, have been and continue to be very slow in passing refunds back to package holiday businesses, which means that those package holiday businesses are unable to refund their customers as promptly as they would wish," she said.
"It is essential, therefore, that effective regulatory action is taken against the airlines that are not currently refunding with seven days, as required under relevant consumer protection legislation."
Airlines are regulated by the Civil Aviation Authority which has been putting pressure on companies to comply.
What are my rights?
- If you have a package holiday cancelled by the provider, then a refund should be provided for the whole holiday within 14 days
- If your flight is cancelled, you are entitled to a full refund to the original form of payment within seven days, although many airlines are struggling to meet that deadline. You can accept, or refuse, vouchers or a rebooking but a voucher will probably be invalid if the airline later goes bust
- If you decide against going on a future flight, which is not yet cancelled, then there is no right to a refund. Different airlines have different rules over what you can do, but many are waiving any charges for changing to a later flight or having a voucher instead. Your travel insurance is unlikely to cover you