Online travel agent Lastminute.com has been threatened with court action by the competition watchdog for failing to pay out refunds to some customers.
The company vowed to make £7m of payments by the end of January to 9000 customers who had holidays cancelled due to the pandemic under a formal agreement with the Competition and Markets Authority (CMA).
But the watchdog said £1m owed to 2600 customers remains outstanding.
Unless the money is paid out within seven days, court action will follow, it said.
The CMA also found that the company failed to meet its ongoing commitment to repay all customers entitled to a refund within 14 days of their package holiday being cancelled on or after December 3.
Lastminute.com is also accused of telling some package holiday customers to go directly to their airline to get the cost of their flight back, in breach of package holiday rules.
To avoid court action, Lastminute.com must also ensure that customers who book their package holidays from now on will receive a full refund within 14 days, the watchdog said.
Andrea Coscelli, chief executive of the CMA, said: “It is wholly unacceptable that thousands of Lastminute.com customers are still waiting for full refunds for package holidays despite the commitments the company signed with us.
“We take breaches of commitments extremely seriously. If Lastminute.com does not comply with the law and pay people their outstanding refunds quickly, we will take the company to court.”
The CMA has previously written to more than 100 package holiday firms to remind them of their obligations to comply with consumer protection law.
Virgin Holidays, Tui UK, Sykes Cottages and Vacation Rentals have previously made refund commitments.
Last December the CMA said it was investigating whether airlines had breached consumer rights by failing to offer cash refunds for flights passengers could not take amid the pandemic.
The separate probe will look at situations where airlines continued to operate flights despite people being unable lawfully to travel for non-essential purposes.
It said that in some cases where flights were not cancelled, customers were told to rebook or offered a voucher rather than a refund.