Package holiday firms Teletext Holidays and Alpharooms have formally agreed to hand back £7 million to customers who saw their holidays cancelled due to the Covid-19 pandemic.

Their parent company signed an undertaking that binds it to process all refunds by the end of August, with customers waiting the longest expected to receive their cash first.

Bosses also vowed to ensure all future refunds for cancelled holidays due to the pandemic are made within 14 days.

Failure to comply could result in court actions and sanctions.

It follows similar agreements made by LoveHolidays, Lastminute.com, Virgin Holidays and Tui UK, after thousands of customers complained that the companies had failed to refund them for cancelled trips.

The competition watchdog launched an investigation into Teletext Holidays in February over the missing £7 million and demanded the money was repaid.

At the end of April the CMA informed parent company Truly Holdings that it was preparing to take them to court unless an undertaking was signed.

Andrea Coscelli, chief executive of the CMA, said: “There’s no excuse for travel firms to delay refunding customers what they are legally owed, even in these extraordinary times. Companies should be doing the right thing without the threat of court action.

“As a result of our work, customers who have waited many months for their money back from Teletext Holidays and Alpharooms will now receive a full refund.

“With international travel resuming and many people considering long-awaited trips abroad, all package holiday firms must give refunds within 14 days where these are due, and should also provide clear cancellation information so that no one else is unnecessarily put through this ordeal.”

Teletext will also have to provide the CMA with regular reports on the progress of its repayments.

Dedicated pages for refunds will be created on the company’s websites and those who received credit notes but not yet used them will also be offered the opportunity to receive a cash refund instead.

The travel sector has been one of the hardest hit during the pandemic and has faced the most scrutiny from the CMA, which wrote to more than 100 firms reminding them of their responsibility to process all refunds within 14 days by law for any cancellations.

A spokesperson for Teletext Holidays said further details on the refund timescale and process will be published on its websites on Friday.

The company added: “We are pleased that a successful conclusion has been reached with the CMA in regards to the processing of refunds for our customers who have had their package holidays cancelled due to Covid-19.”