Mark Pestronk
Q: Back in August 2022, when the DOT issued a proposed rule requiring agents to be responsible for refunds when an airline delays or cancels a flight, you wrote that "the DOT wants to adopt the most anti-travel agent regulation in its 55-year history." I understand that the DOT has now finalized its proposal and adopted a final rule. Is it as anti-agent as you claimed it would be? What specific duties has the DOT imposed on agencies? When does the proposed rule take effect?
A: The DOT listened to ASTA and other agency commenters, and it declined to make all agencies responsible for all airline ticket refunds. Instead, agencies are responsible only in cases where they were the credit or debit card merchant after selling directly to consumers. They may also be responsible when accepting payment by cash or check.
An agency is typically the credit card merchant (also known as the merchant of record) only where it sells air-inclusive trips that it organizes or where it acts as a consolidator. An agency typically accepts cash or checks these days when it organizes groups or serves ethnic markets, although there certainly are many other agencies that will accept client checks.
By "responsible," I mean that the agency must make the refund out of its own funds by the deadlines in the rule. When the agency is responsible, it does not matter whether, at the time of the flight cancellation or substantial delay, the agency is still holding the client's money. It does not even matter if the airline files for bankruptcy and makes no reimbursements.
As I noted in my column about the proposed rule, the definition of "ticket agent" in the law is broad enough to cover non-ARC-appointed agencies and even independent contractors. So, if an IC collects a client's payment, issues a receipt and remits the money to its host, and the airline cancels or substantially delays the flight, the IC must make the refund.
If the refund-for-cancellation requirement applies to your agency, you are also responsible for refunds for delays under the new rule. The DOT's rule specifies the number of hours that must elapse before a delay triggers the refund requirement: generally, at least three hours for domestic flights and six hours for international flights.
The deadlines for required refunds are seven business days of a refund becoming due for credit card purchases and 20 calendar days of a refund becoming due for cash, check or debit card.
Obviously, there must be new levels of cooperation and communication between airlines and agencies in order to avoid chaos, so the DOT delayed the effectiveness of the refund requirements for six months.
Even though the DOT limited the application of the final rule, it will still create a substantial burden on many agencies by putting them in a loss position. I predict that many more agencies will simply stop selling airline tickets.
While federal law does not enable consumers to sue agencies for violation of DOT rules, the DOT itself can impose thousands of dollars in fines per violation.