An investigation by Which? found that some companies are refusing to provide refunds in a breach of their legal obligations, while others are providing vouchers or credit notes “which may prove to be worthless” if holiday firms collapse.
It cited industry estimates that up to £7 billion in payments made by UK customers are affected.
Which? said it found that none of the country’s ten biggest holiday companies, including Tui and Jet2, are offering full refunds within the legal time frame, and some are refusing to provide refunds altogether.
Under EU law, travel companies must refund customers within 14 days if their package holiday is cancelled.
Which? also contacted the UK’s ten largest airlines – including British Airways and EasyJet – and claimed that none are refunding passengers according to the law.
Under the EU’s Denied Boarding Regulations, passengers are due a refund within seven days if a flight with an airline based in the UK or EU, or from an airport in the UK or EU, is cancelled.
Frustrated customers told Which? that carriers are making it almost impossible to contact them to find out if they will be refunded.
Richard Lartey, 27, from London, has been waiting more than a month for his money to be returned for a cancelled British Airways flight.
He said: “The only option for a cash refund is to call up. Instead of holding customers in a queue, the telephone system would simply hang up after playing a short message.”
The airline has told Mr Lartey his money will be refunded, but he is yet to receive the cash.
Rory Boland, editor of magazine Which? Travel, said some travellers are thousands of pounds out of pocket and have “no idea if or when they’ll see their money again”.
He said: “We do not want to see the industry suffer further as a result of this outbreak, but it cannot be on consumers to prop up airlines and travel firms, especially when so many will be in difficult financial situations of their own.”
Which? has launched a ten-point plan requiring urgent action from the government, travel companies and insurers which it claims will help the industry and protect holidaymakers.
lExtending the 14-day refund period for package holidays to one month
lA temporary government travel guarantee fund to support firms unable to fulfil their legal obligations
lAll consumers eligible to receive a refund must be offered cash
A spokesman for Airlines UK, which represents UK carriers, said its members are facing “a far longer than usual volume of refund claims to get through”.
He added that the coronavirus lockdown means firms are “not able to bring in additional staff to deal with them”, adding: “We are thankful to passengers for their continued patience.”
Trade association Abta has warned that the deluge of claims caused by the travel industry grinding to a halt means firms will collapse if they are forced to pay out immediate cash refunds.