The UK travel industry has welcomed announcements from the department for transport and the CAA that ATOL protection will be extended to cover refund credit notes.

The notes have been issued in place of cash refunds in recent weeks, as the hospitality industry battles a huge backlog of cancellations in the wake of the Covid-19 shutdown.

But there have been questions over their legitimacy.

Package travel regulations require refunds for cancelled holidays to be paid in 14-days.

However, travel companies have argued that, if they adhered to requirements amid wholesale cancellations, most would be put out of business.

Refund credit notes were seen as a compromise, allowing travellers to rebook at a later date.

In a long-awaited decision, the CAA said: “This news will provide clarity to consumers concerned as to whether their money would be secure if they chose to accept a refund credit note from their travel company following a cancellation of their ATOL-protected booking.

“To ensure consumers that hold ATOL-protected bookings retain financial protection, refund credit notes issued in respect of these bookings will benefit from ATOL protection up until September 30th.

“If the consumer chooses a refund credit note, they should have the option to convert it to a cash refund at any point and must do so before September 30th, 2021.”

However, the CAA added consumers are entitled to a cash refund and must be offered this option at the same time as a refund credit note or booking amendment.

In response to the announcement, an ABTA spokesperson said: “ABTA welcomes the government’s action to back refund credit notes through the ATOL scheme; this gives reassurance to consumers and supports the travel industry at an especially difficult time.

“This development verifies that the ATOL scheme provides protection for cancelled holidays when a refund remains outstanding in the event of a travel organiser’s failure.

“This is the same for non-flight-based package travel with ABTA bonding under the package travel regulations.

“This assurance enables consumers to hold and rely on Refund Credit Notes with confidence, before rebooking a much-needed holiday.”