The Office of Fair Trading (OFT) has carpeted the UK's four biggest tour operators for charging excessively high cancellation charges for holidays.

The government consumer watchdog is threatening to take legal action under the Unfair Contract Terms Act.

First Choice, JMC, Thompsons and Air Tours have until recently charged a maximum 100% of the holiday cost if it was cancelled within three weeks of the departure date.

Despite most operators now implementing a three-day notice period for the 100% charge, OFT officials believe the cancellation charges are still far too high compared to other European countries.

“The main problem is that the tour operators have refused to provide us with financial information to justify the cancellation charges they set,” said Mark Kram of the OFT.

“Although the maximum cancellation charge is now applied for three days' notice rather than three weeks, we are concerned that the operators have just moved the goalposts.

“They have just pushed the cost further down the line so that people cancelling holidays two months in advance are now being charged more.

Kram confirmed that insurers were among the lobbyists who complained about the excessive cancellation charges.