It ends months of worry for people who feared they could lose thousands of pounds.
Holidaymakers who have accepted refund credits note for cancelled package holidays will get their money back if travel firms goes bust, the government has said.
Until now, there have been doubts as to whether consumers’ refund credit notes would be protected if the issuing travel company collapsed before they could be spent.
But the government has now said it will protect refund credit notes issued between 10 March 2020 and 30 September 2020 for ATOL-protected bookings.
The scheme is normally used to stop package holiday customers being stranded abroad or losing money from future bookings when operators collapse, as happened with Thomas Cook in September 2019.
Consumer group Which? has been advising people to reject refund credit notes and “insist on a refund” because of concerns about them being worthless if the issuing firm goes under.
Transport Secretary Grant Shapps said: “We want to send a clear message to passengers that they can book their summer holidays with confidence, which is why we’re stepping in to protect refund credit notes issued as a result of COVID-19 cancellations.
“This is not only good news for anyone looking to get away for a break in the sun, but also for the aviation and travel sector which has been hit hard by the pandemic.”
The Civil Aviation Authority (CAA) said the Department for Transport had provided “much-needed clarity” by confirming that such cases will be covered by the ATOL scheme.”
Which? Travel editor Rory Boland said the clarification will be “a huge relief” to customers who have accepted refund credit notes.
He added: “This is a positive step towards restoring trust in the travel industry.”
Some travel firms are offering vouchers rather than refund credit notes.
Although these are often worth more than the original booking, to incentivise customers not to request cash, the CAA said they are not ATOL protected.
The government is the financial backer for the ATOL scheme, which is run by the CAA.