The Civil Aviation Authority is poised to begin legal action against about 20 travel companies it says are in breach of the new Atol Regulations.
The CAA confirmed today it has written to the firms, mainly travel agents, ordering they cease and desist from selling holidays requiring financial protection without Atol cover.
CAA consumer protection group deputy director David Moesli said: "Some businesses are still not complying. These businesses are breaking the law. We are therefore stepping up our enforcement action."
At the same time the CAA confirmed the introduction of the Flight-Plus Atol at the end of April has brought 2.5 million previously unprotected holidays into the Atol scheme in the year to next March.
That takes the total Atol-protected bookings for the 12 months to 21.3 million, although the final number of protected holidays won't be known until the end of the financial year.
There were about 36 million outbound holiday trips from the UK in 2012.
Fewer than 100 companies have acquired a Flight-Plus Atol since introduction of the new licence, although some applications are still being processed.
Accredited bodies have brought more than 1,000 agents into the scheme and there are also two franchise schemes providing licences.
The CAA's joint-licensing arrangement with Abta has chiefly dealt with extending the licences of existing Atol holders.
Moesli told Travel Weekly: "We will continue to educate people on Atol Certificates which came in this month. But the new regulations came in in April. We have to start ratcheting up action on those who are not doing anything.
"There are people who continue to sell Flight Plus outside Atol - some online, some on the high street, most at the bottom end of the market. We have identified them.
"We contacted people this week. We'll see if we can educate them in the next few weeks. [But without compliance] you can expect to see legal remedies before the end of the year."
CAA consumer protection group director Richard Jackson added: "We can distinguish between those who are struggling to comply and those wilfully failing to comply.
"We will educate where appropriate and act firmly where appropriate. Not to act would be unfair on the rest of the industry and on consumers.
"We want to work with the non-cooperative part of the industry, but not for long."
The CAA has set up a whistleblower service with a hotline to encourage staff at companies which may be in breach of the regulations to call in confidence.
It is also asking others in the industry and members of the public to blow the whistle on companies flouting the Atol rules.
CAA whistleblower contacts - tel: 01293 573190 Email: email@example.com