Mark Pestronk
Q: In mid-September, ARC published changes to the standard Agent Reporting Agreement that all ARC-appointed agencies must sign. Those changes will automatically become effective Nov. 7 if we issue a ticket on or after that date. Were there any surprises this year?
A: ARC is continuing to enhance its power over every travel agency that allegedly owes money to the carriers.
Before credit cards became the overwhelmingly dominant form of payment for tickets, travel agencies of all sizes would periodically get into trouble if they did not have enough cleared funds in their bank accounts to cover the next ARC draft on those accounts. ARC would demand a cashier's check by overnight courier or a wire transfer within a day or so after it notified the agency that the draft had been dishonored.
Similarly, if the agency failed to report all its sales, the affected carriers would notify ARC that they had honored a ticket that had no corresponding record of ARC payment, in which case it would likewise demand payment by cashier's check or wire transfer within.
In either case, if the agency did not pay by the deadline set by ARC, the agency would be declared in default, and ARC would notify the carriers and the GDS vendor, which would cut off the agency's ability to issue tickets. Then, if the agency did not pay in full within 30 days (or a longer period if negotiated with ARC), ARC would terminate the agency's appointment.
These days, with credit cards as the rule and cash as the exception, the default and termination process is probably more often invoked for "improperly reported" tickets than for bounced drafts or unreported sales. The ARC agreement defines "an improperly reported transaction" as "an ARC Traffic Document(s) Submitted in Agent's Sales Report that contains unauthorized, false and/or inaccurate data."
ARC interprets its definition to cover any ticket charged to a credit card where the cardholder claims that the charge was unauthorized or the ticket was charged to a canceled card. So ARC has the power to declare an agency in default and terminate it for nonpayment of just one debit memo for an allegedly unauthorized credit card charge.
If the agency pays the debit memo and avoids termination, ARC will have new powers to require the agency to increase its "financial instrument," which means its bond, letter of credit or cash deposit. If an agency is declared in default for an amount that exceeds its current financial instrument, which is typically $20,000, or has been declared in default twice at any time in its history, it will have to increase the financial instrument to an amount equal to its three highest net cash remittances during the previous 12 months.
For example, if all your sales were on credit card except for one group that bought $250,000 in tickets over a one-week period 11 months ago and paid you by check, you must post a $250,000 financial instrument after the second time you are declared in default.
Faced with such a hurdle, many agencies would undoubtedly choose to give up their ARC appointments, which is probably fine with ARC.