The holiday rentals firm behind Hoseasons and Cottages.com has agreed to give customers refunds for cancelled trips due to the coronavirus crisis after being reported to the competition watchdog.

The Competition and Markets Authority (CMA) said Vacation Rentals had changed its policy after originally refusing to give money back to customers whose stays had been cancelled.

Vacation Rentals – which runs a raft of brands such as Welcome Cottages and Blue Chip Holidays – has now made a formal commitment to the CMA that it will give customers affected by lockdown the option of a full refund.

The CMA said its Covid-19 taskforce had received around 4,500 reports about UK holiday rental companies, with complaints about Vacation Rentals making up a “significant proportion”.

Common complaints include companies refusing to provide full refunds at all or offering only vouchers instead of cash refunds, according to the watchdog.

But it said it is continuing to investigate the sector, with other holiday companies still refusing to offer customers their money back.

The CMA warned it could take court action against firms that refuse to treat customers fairly amid the Covid-19 pandemic.

Chief executive Andrea Coscelli said: “We welcome this step and other holiday lets firms must now follow suit.

“We know the pandemic is presenting businesses with challenges too, but it’s not right that people are being left hundreds or even thousands of pounds out of pocket – on top of having to sacrifice their holidays.

“Consumer protection law exists for a reason; businesses must observe the law or face the possibility of enforcement action.”

While it is positive to see some firms changing their policy on refunds, there are still many customers struggling to get their money back for cancelled holiday accommodation and package travel bookings

Vacation Rentals runs some 22 sites offering holiday lets around the UK, as well as Italy, France and Ireland.

It has pledged to show its refund policy clearly on its website and social media and will provide the CMA with monthly reports on how many refunds have been made and accepted.

But thousands of Britons remain out of pocket for holidays booked this year, with firms – including airlines and major brands – insisting on offering only credit notes and vouchers.

Low cost airline Ryanair has vowed to pay customers refunds within the next 10 to 12 weeks, but a survey late last month by Which? signalled four out of five Ryanair passengers are still waiting for a payout.

Some 84% have not had their money returned and only 5% received a refund within the legal time limit for EU carriers of seven days, the poll by consumer group Which? indicated.

The proportion of passengers with other major airlines who had not yet received a payout included 63% with easyJet, 23% with British Airways and 19% with Jet2.com.

Rory Boland, travel editor at consumer group Which?, said: “While it is positive to see some firms changing their policy on refunds, there are still many customers struggling to get their money back for cancelled holiday accommodation and package travel bookings.

“The CMA must continue to investigate these sectors and come down strongly on any firms found to be flouting the law.”