Q: I have read that the Department of Transportation has proposed a new regulation that would require travel agencies to provide cash refunds out of their own pockets if an airline cancels or delays a flight for a long time. Is this true?
A: Yes, it is true. The DOT wants to adopt the most anti-travel-agent regulation in its 55-year history. In a nutshell, the DOT is proposing that travel agencies be responsible -- equally with the airline -- for making refunds when an airline cancels a flight or significantly delays a flight, regardless of whether the agency is in possession of the ticket purchase funds and regardless of whether the agency was the credit card merchant. In other words, the agency would have to pay the refunds if the airline doesn't.
I know that this sounds preposterous. However, I assure you that it is true; you may read it yourself at https://www.transportation.gov/airconsumer/latest-news. Click on the Notice of Proposed Rulemaking.
The department considered limiting the rule to cases where the agency is still in possession of client funds when the request is made, but it "does not propose this approach because which entity is in possession of the funds would not necessarily be clear to the consumer because multiple entities may be involved in the transaction process."
There is no exemption for small businesses: "This requirement would cover retail agencies of all sizes, conducting business online or via brick-and-mortar stores, that transact directly with consumers." One obvious conceptual problem with such a rule is that most travel agents are now home-based independent contractors (ICs) of host agencies. Since ICs are self-employed travel sellers, many of whom make airline reservations, it appears that they themselves would have to guarantee the refunds.
Of course, the carrier would also be responsible for refunds. Says DOT, "holding both the airline and the ticket agent jointly responsible may avoid potential delays for the airline to return the funds to the ticket agent if that step is needed to complete the refund process, or avoid the potential delays for ticket agents to provide the information needed for airlines to issue refunds." Sounds like mass confusion to me.
For packages that include air, the rule would require a refund of the air portion of the purchase price, even if the agent has forwarded all the funds to suppliers but only if the agency is the credit card merchant for the package. Why the DOT made this exception for packages and for not all tickets is unclear.
At this point, ASTA clearly needs to file comments explaining why the DOT should not to adopt the rule. All other agency groups as well as agencies need to do the same. The comment deadline is 90 days away.
The DOT will hold a virtual hearing on the rule on Aug. 22. Anyone can testify by signing up in advance. To find out more, click on the Notice of Public Hearing.