Mark Pestronk
Mark Pestronk

Q: I have read a few articles in the general media stating that the Federal Maritime Commission (FMC) has finally passed a rule requiring cruise lines to provide refunds when they cancel a cruise. Is that true? If the rule had been adopted a year ago, would Crystal have made the refunds that it failed to make?

A: I have seen those articles. One states, "Travelers no longer need to worry about losing their money when a cruise is canceled or delayed thanks to new rules enacted by the FMC." Another states, "Any cruise canceling or delaying a trip by three or more days is placed in the 'nonperformance' category, and [consumers are] entitled to a full refund. ..."

Those articles are not correct. The FMC lacks the authority to order cruise lines to make refunds, and the new rule does not require refunds by cruise lines. Instead, what the FMC did was to clarify the procedure for filing claims against the surety bonds that cruise lines must post with the FMC.

The bonds are supposed to cover claims for "nonperformance." Until now, there had been no definition of that quoted word and no clear deadline or method for filing claims. The new rule, which went into effect in mid-April for large cruise lines, provides the definition and the method and not much else.

Until now, a cruise line could have argued that providing future cruise credits instead of refunds for a canceled cruise did not constitute nonperformance. The new definition of nonperformance eliminates that possibility.

Nonperformance now means "canceling or delaying a voyage by three or more calendar days, if the passenger elects not to embark on the delayed voyage or a substitute voyage offered by the passenger vessel operator."

So, if the cruise line says, "We have postponed the cruise until next year," that would be nonperformance if the passenger does not voluntarily choose to participate in the "postponed" cruise. Now, after the consumer requests a refund from the cruise line and waits 180 days with no result, the consumer can file a claim on the bond through the FMC.

The bond would cover the cruise price, including all taxes and charges. It would not cover lost airfare, prepaid excursions or other travel arrangements.

The trouble is that the surety bonds are not going to be enough to cover refunds for Crystal or any other cruise line that goes out of business before paying out refunds due. Since there was never any controversy about whether a cruise line's complete insolvency gave rise to a claim on the bond, the new rule doesn't really add anything to a passenger's rights in cases of insolvency.

The rule is too late to have any effect on the thousands of passengers whose trips were canceled. Unfortunately, the FMC has limited powers and jurisdiction, and it takes the government a long time to adopt regulations these days. The FMC probably did the best it could under the circumstances. 

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