Firms refusing holiday refunds to face action

Customers can also take their own legal action against unfair terms.

The CMA said it has identified three sectors of particular concern – weddings and private events, holiday accommodation, and nurseries and childcare providers.

It will tackle these areas as a priority. However, it added that most businesses are acting reasonably in what are unprecedented circumstances, and the crisis is placing everyone under pressure.

Martin Lewis, founder of MoneySavingExpert.com, said: “These Competition and Markets Authority guidelines effectively say it doesn’t matter what’s in the contract – if you’re not delivering the goods or service to customers, they have rights, and they should be given a full refund.

“However, while this is welcome guidance, often even when rights are clearcut, consumers have no way of enforcing them, other than starting court action – which is in no one’s best interest. How can you force a firm to give you a refund when it simply says no, regardless of the law? So ultimately enforcement action is likely to be needed.”

The CMA’s move comes as a dozen EU member states have asked the European Commission to allow airlines to give vouchers instead of cash refunds for cancelled flights.

The group, which includes France, Ireland, the Netherlands and Portugal, issued a joint statement calling for a temporary amendment to consumer law because carriers “continue to incur high running costs” despite most planes being grounded due to the coronavirus pandemic.

Enabling airlines to issue vouchers rather than cash refunds would be “a solution for current cash flow constraints of airlines”, they wrote.