Holidaymakers who opted for refund credit notes in lieu of cash when bookings were cancelled due to Covid are urged to act now to avoid losing valuable protection.

In July 2020, the Civil Aviation Authority (CAA) announced that passengers who accept refund credit notes for cancelled ATOL protected holidays would be financially sheltered if the firm were to go bust.

The protection applied to notes issued between 10 March 2020 and 19 December 2021.

But this protection is coming to an end. The CAA confirmed that if a travel company goes bust after 30 September 2022, travellers with refund credit notes will not be covered by the ATOL scheme, meaning they risk losing their money.

In total, £54m remains unspent on these refund credit notes and as such, the CAA is urging people to redeem them as soon as possible by either:

• Booking a holiday using the refund credit note. If it’s a flight inclusive package holiday booking, the trip will be ATOL protected.
• Requesting a refund. This can be made from the travel company.

In November 2021, £132m of refund credit notes remained unspent. This reduced further to £85m in April 2022.

Michael Budge, head of ATOL at the UK Civil Aviation Authority, said: “Demand for travel is continuing to grow and we want to make sure travellers are making the most of the financial protection available to them.

“With more than £50 million of refund credit notes remaining unspent, this affects consumers booked with some of our biggest travel companies.

“If you have one of these refund credit notes, we advise making an ATOL protected booking or requesting a refund before 30 September 2022 to avoid putting your money at risk.”

ATOL is a protection scheme afforded to holidaymakers with flight-based bookings which refunds, repatriates and reimburses travellers if the company fails.

Under the terms of the Package Travel Regulations 2018, if a holiday is cancelled, holidaymakers have the right to a cash refund within 14 days. The regulations state that refund credit notes shouldn’t be automatically sent to customers requesting cash as a strategy to delay payments.

But over the course of the pandemic, holiday companies were trying to persuade customers to accept refund credit notes for cancelled trips in a bid to preserve cash. But the problem is that notes become worthless if the company issuing them later fell into administration.

Related: See YourMoney.com’s Flight delay and cancellation rights guide for more information.