Questions and answers about the DOT's refund rule for agencies: Travel Weekly

Mark Pestronk

Q: I understand that, under the DOT’s proposed rule, travel agencies would be legally responsible for making refunds to passengers when the carrier cancels or substantially delays a flight.

I have some questions about the implications of what the DOT is proposing. First, as you know, most travel advisors are independent contractors (ICs) of host agencies, so is it the IC or the host that would be responsible?

A: Under the Federal Aviation Act of 1958, travel agencies are called “ticket agents,” and the refund duties would apply to “ticket agents.” The term is defined as a “person that as a principal or agent sells, [or] offers for sale … air transportation.” The word “person” means an individual or a legal entity.

Note that the definition is not limited to ARC or Iatan appointees, nor it is limited to the entity that issues a ticket. Rather, it refers to any person who “sells” air transportation. Therefore, the refund duty could certainly apply to the IC as the seller, although the DOT may intend it to apply only to the officially appointed entity, which would be the host. Perhaps the DOT will clarify this issue in the final rule.

Q: Second, I understand that the rule would apply to all U.S. airlines as well as foreign airlines on trips to or from the U.S. If a foreign airline goes out of business and shuts down without making refunds, as they have been known to do, would the agent really be on the hook for the refunds?

A: Yes. The travel agent and the airline would be jointly responsible, which means that if the airline failed to make a refund because it had no money, the agent would have to do so.

Q: Third, if the airline does not make a required refund, when must the agent make the refund out of his or her own pocket?

A: When a refund is due because of a cancellation or substantial delay, and the passenger declines to accept a future travel credit, the carrier would have seven days to make a credit card refund and 20 days to make a refund when the passenger paid by check or other cash equivalent. The same deadlines apply to agents. I realize that result makes no sense because the agent won’t know whether the carrier made the refund by the time the deadline rolls around, so perhaps the DOT will clarify this issue.

Q: Fourth, if the agent makes a refund, what is the mechanism for getting reimbursed by the airline?

A: There is no mechanism. At present, if a ticket is nonrefundable, the agent is not allowed to refund it. Presumably, that restriction will change if the DOT rule goes into effect, but if the airline disagrees with the agent’s decision, the agent has no recourse.

Q: Fifth, if the rule is adopted, won’t most agents just stop selling airline tickets?

A: I have no doubt that the rule would have such an effect, even though it would hardly be in the public interest.

Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected]

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