Mark Pestronk
Mark Pestronk

Refunds, refunds, refunds! Agencies have been overwhelmed by refund requests, and many advisors are unsure of their own legal obligations or their clients' legal rights. Here are some of the most common questions my clients ask.

Q: Doesn't the recent DOT order require airlines to provide full refunds when passengers cancel?

A: No. The order -- which you can read here -- applies only to flights canceled by the airline, significant schedule changes or significant delays.

The DOT has not defined what it means by "significant." Instead, it states, "Whether you are entitled to a refund depends on many factors, including the length of the delay, the length of the flight and your particular circumstances. DOT determines whether you are entitled to a refund following a significant delay on a case-by-case basis."

When it comes to cancellations by the passenger, each airline's contract of carriage governs. Lately, most airlines (as well as cruise lines and resorts) have changed their contracts to provide that the passenger may cancel flights (or cruises or resort stays) scheduled in the next several months and then apply the entire value of the ticket (or sale) to a future booking. Travel Weekly keeps a list here.

Q: If the airline cancels or significantly changes its schedule but then drags its feet in providing the refund due, what should I tell my client to do?

A: Advise the client to file a complaint with the DOT at https://airconsumer.dot.gov/escomplaint/ConsumerForm.cfm. Such complaints are often effective, and perhaps more importantly, your advice tends to deflect blame away from your agency.

Q: If my agency is the credit card merchant for a package that involves a flight that the airline canceled, must I follow the DOT order?

A: It depends on the participant agreement covering the package. If you have no agreement or if you cannot prove that the client agreed to your terms and conditions, then you should follow the DOT rule and process the ticket refund or request that the airline do so. On the other hand, if your agreement, disclaimer or terms and conditions state that there will be no refunds under any circumstances, then you do not have to follow the DOT order.

Q: If the airline or other supplier refuses to provide a refund that it should provide, could the client successfully sue my agency for it?

A: No. Agencies are not liable for suppliers' failure to honor their obligations. The only exceptions to this rule are where the agency separately promises to provide a refund or where the agency knew or had reason to know that the supplier was in financial trouble at the time of the sale.

Q: Should our advisors encourage clients to accept future credits instead of seeking refunds?

A: Yes, unless it is clear that the client has an urgent need for the money. If everybody who is legally entitled to a refund got one, many suppliers would go bankrupt, and the entire travel industry would be permanently harmed.

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