Posted on: November 26, 2012
Credit or credit?
Once again our Transportation Department’s instincts for consumer protection have shown themselves to be so good they might be too good.
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We refer, this time, to the DOT’s “guidance” about how tour operators and airlines should conduct themselves when offering public charters. Following the messy collapse 10 months ago of the Direct Air charter program, the DOT came up with some preventative measures so that other operators could avoid what appear to have been some of Direct Air’s worst mistakes.
Most of these are good ideas. For example, Direct Air’s charter contracts with airlines didn’t always rely on the airline to supply its own fuel, but reserved that task for the tour operator.
In a free economy and in an arm’s-length contract, our Inner Capitalist tells us that the parties should be free to assign the risks and rewards as they choose.
But this kind of arrangement should raise a red flag for any sensible observer of the travel business.
Given the volatility of fuel prices, a tour operator would have to be in love with risk or death to make such a deal.
To the extent this was a major factor in Direct Air’s demise, the DOT seems to be acting responsibly to ban this kind of suicide pact.
But we can’t say the same for the DOT’s categorical edict that operators must stop accepting debit cards as payment for public charters. The DOT’s rationale is that it wants “to ensure that consumers not paying in cash receive the protections of the Fair Credit Billing Act.”
This may be an honorable desire, but when did Congress assign this task to the DOT?
In fact, since when is it the job of any government agency to prohibit buyers and sellers from using legal forms of payment on the grounds that they have unequal costs and risks?
The DOT already requires that operators cover themselves with a bond and place all passenger funds in escrow. If charters are so inherently risky that the DOT believes passengers shouldn’t use debit cards, what’s next, ordering travel sellers not to accept checks?
Maybe the DOT’s charter rules need to be updated to reflect 21st century realities and forms of payment.
The DOT says it “may” address this in a “future rulemaking” and may “consider” exemptions to the debit card policy, but in the meantime it has, for all practical purposes, adopted a virtual ban on a legal form of payment in the guise of a “guidance” letter with no debate, no due process.
Don’t be surprised if operators are heard to say to agents, “Sorry, we can’t accept your client’s debit card, because the government is afraid we might go bust.”