Loveholidays has committed to pay out more than £18 million to customers in refunds (due to the Covid-19 pandemic) following action by the Competition and Markets Authority (CMA).
The CMA said it had been "investigating" Loveholidays after receiving hundreds of complaints that people were still awaiting refunds.
When customers contacted Loveholidays to request a refund for a cancelled holiday, they were told they would only receive money back for their flights once the firm had received refunds from the respective airlines.
Under the Package Travel Regulations, OTAs are legally bound to refund customers for package holidays cancelled due to coronavirus, regardless of whether or not the agent has received money back from suppliers.
Loveholidays has now signed formal commitments – known as undertakings – that ensure these customers receive all their money back by March 2021 at the latest.
More than £18 million will be refunded to 44,000 Loveholidays customers. Of this, so far £7 million has been refunded to 20,000 customers.
Refunds will be made in two parts. Further details of the relevant payment dates can be found on the CMA’s package travel webpage.
To ensure that Loveholidays adheres to its commitments, the company must provide the CMA with regular reports on the progress of its repayments.
If the firm fails to repay customers by these dates, the CMA is prepared to take the company to court.
Andrea Coscelli, chief executive of the CMA, said: “Travel agents have a legal responsibility to make prompt refunds to customers whose holidays have been cancelled due to coronavirus.
“Our action today means that Loveholidays’ customers now have certainty over when they will receive their money back and they will receive this without undue delay.
“We are continuing to investigate package travel firms and where we find evidence that businesses are breaching consumer law, we will not hesitate to take enforcement action to protect consumers.”
A Loveholidays spokesperson said: “We are pleased to have reached agreement with the CMA on undertakings to accelerate refund payments to our customers impacted by package holiday cancellations as a result of the Covid-19 pandemic.
"The pandemic has brought unprecedented disruption to the entire tourism sector and we appreciate the CMA’s acknowledgement of the extraordinary pressures faced by package holiday companies this year.
"We have been working tirelessly since March to do everything we can to ensure our customers receive their money, and have refunded more than £205 million owed to over 180,000 customers – the equivalent of 10 years’ worth of refunds in eight months.
"And as noted by the CMA, since signing the undertakings we have already made significant progress in the payment of these refunds.
"Despite the severe challenges caused by Covid-19, we are already refunding all hotel and transfer elements of cancelled bookings within 14 days of the cancelled departure date. We sincerely thank our customers for their continued patience, and apologise that it has taken much longer than normal to process their refunds.
"We appreciate the efforts of those providers who have worked cooperatively with us to help customers in this difficult time. Whilst we’ve made significant progress, there is clearly more to do, especially on airline refunds, and we urge all parts of the tourism sector to work together to ensure that customers are refunded as quickly as possible.
"Our priority now is to continue our focus on securing flight refunds for our customers.
"We have so far processed 90% of all airline refunds owed to our customers and are working very hard on behalf of our customers to secure the remaining refunds. But it’s important to note that we do not hold the money customers pay for their flights – that money is transferred to the airline when customers make their booking.
"We welcome the CMA’s acknowledgement of the very challenging operating environment for the package holiday sector due to the Covid-19 pandemic, which has been exacerbated by certain airlines refusing to meet their legal obligations with regards to refunds.
"We are optimistic for the future, but it’s critical that all parts of the tourism sector step up to ensure that customers are refunded as quickly as possible."