Mark Pestronk
Mark Pestronk

Q: A large number of our clients are refusing to accept future credits from suppliers, including airlines, cruise lines and tour operators. They are threatening to dispute their credit card charges with their credit card companies. We have heard that other clients are even accepting the credits and then trying to dispute the credit card charge anyway. If the credit card companies charge back the travel suppliers, we are afraid that we will start getting debit memos from the suppliers. Would we have to pay those debit memos?

A: Any supplier that tries to hold an agency responsible for these chargebacks ought to be ashamed of itself. Unfortunately, some suppliers have no shame.

As a general rule, an agent is not liable for a buyer's failure to pay. When a seller (such as a travel supplier) is unable to collect a purchase price from a buyer, there are no grounds for holding the seller's agent liable.

For example, in real estate, if the buyer fails to pay the purchase price for a house, the seller cannot hold its own realtor responsible for the price. In insurance sales, if the insured doesn't pay his insurance premium, the insurance company obviously cannot sue its own agent.

Unfortunately, in the travel agency business, there are exceptions to the general rule. Under several kinds of agency agreements, agencies could be liable.

A travel agency's liability for debit memos depends on the terms of the agreement between the supplier and the agency, if there is one. Some such agreements impose liability for all chargebacks, some do so under certain conditions, and some are silent on the issue.

For example, the ARC agreement, which covers airline ticket sales, states that airlines reserve the right to send agencies a debit memo for sales that don't follow ARC's credit card acceptance procedures. As every agency knows, those procedures are nearly impossible to follow because in most cases they require the agency to obtain a signed and imprinted charge form.

So, as the rules stand now, if you don't follow those procedures, the airline could hold you liable for the debit memo for any chargeback, regardless of whether the consumer did or did not accept the credit offered by the airline. I certainly hope the airlines refrain from sending such debit memos.

In Europe, IATA and the bank clearinghouses are rejecting refund requests for all airline tickets, according to legal experts. ARC ought to take a similar step now.

Other suppliers' agreements do not expressly make agencies liable for chargebacks. For example, I have seen several cruise line and tour operator agency agreements that are silent on the question of chargebacks as well as others that state that the agency is not responsible unless it committed fraud.

One more thing: Agencies should instruct their advisors not to encourage clients to dispute credit card charges from suppliers that are offering credits instead of refunds. Otherwise, you could end up being liable for the chargeback.


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