Mark Pestronk
Q: ARC recently published a paper called "Best Practices for Effective Debit Memo Resolution and Prevention." In my experience, there is very little ARC can do to help with debit memos, since most deal with fare and commission issues, which are outside of ARC's jurisdiction. Is there anything worthwhile in the paper?
A: While I am usually as skeptical of ARC's attempts to help agencies as you are, this document is truly helpful. It can be found here.
The paper was developed by ARC's Debit Memo Working Group, which, according to ARC, consists of "stakeholders from throughout the travel industry, including representatives from airlines, travel agencies, system providers and key stakeholder organizations. ... What started out as a 25-member team in 2013 has grown to over 80 participants from a wide population of the travel industry impacted by memos."
It is remarkable that a committee of "over 80" members has produced any results at all, let alone a very good one. I commend the group on a job well done.
The "best practices" in the document are for agencies, airlines, GDSs and even ARC. Some of these are common sense, but others are new guidelines that, if followed, would help agencies a great deal.
The new guidelines for airlines focus on better communication with agencies. For example, the group recommends: "If denying a dispute, airlines and GDSs must give a clear, concise, but descriptive professional response as to why they are denying or rejecting the dispute. Do not use generic dispute responses (dispute denials) such as "memo stands," "memo valid" or "dispute denied." Address the specific issues noted by the agency in their response. Clearly communicate to the agency what materials, if any, the airline would accept in order to invalidate a memo (e.g., a contract addendum or waiver)."
Wow! If the airlines followed these rules, it would be a new day for agencies. The biggest debit-memo-related headache that many agencies have had over the years is lack of clear communication by airlines.
My clients often tell me that they have a good defense to a big debit memo but that the airline won't address the defense and instead just states "dispute denied," or does not respond at all. If airlines really follow the group's guidelines, agencies would not only have to pay fewer debit memos, but they would also feel better about the ones they had to pay.
Another guideline tells airlines to "respond to disputes within 30 calendar days of receipt of the dispute." That would be terrific, as airlines sometimes never respond and eventually turn the matter over to a collection agency.
A lot of debit memos arise from GDS autopricing. The working group encourages agencies to "use autopricing when possible to avoid errors." That's sound in theory but, as agencies know, airlines sometimes send debit memos even for autopriced tickets.
So, agencies look to the GDS for reimbursement, and the guidelines now ask GDSs to respond to the agency "within 30 calendar days of receipt of a debit memo," and to "pay the travel agency within 14 calendar days of accepting responsibility for a memo."
One of the most interesting guidelines in the paper states that "the ticketing agent, not the booking agent, is responsible for the debit memo." This is the first time any industry actors have articulated this legal position as a general proposition, and it has broad implications where two agencies are involved in a transaction.
In a future column, I'll analyze some of the paper's best practices for agencies in preventing, communicating about and resolving debit memos.