If my agency gives up its
ARC appointment, can ARC deduct outstanding airline debit memos
from the bond before the bond is returned?
If so, how far back can the debit memos go? If ARC goes
beyond its authority, what recourse do we have after we no longer
have an ARC appointment?
A: ARC can make claims against the bond or
letter of credit (and thereby lower the amount of collateral that
gets returned to you) only for certain types of debit memos.
The debit memos must be "for tickets or other instruments of
value issued on ARC traffic documents ... in paper and electronic
format."
The quoted clause is from Section 4.A(1)(c) of the ARC Agent
Reporting Agreement. The rule goes on to cite examples of such debt
-- "amounts owed for tickets which have been used but not reported
or paid for; amounts owed for dishonored drafts or debit entries;
and amounts owed on account of ... theft ... ."
In other words, the types of debit memos that can result in
claims against your bond or letter of credit are allegedly
unreported sales, dishonored drafts and ticket thefts.
Conversely, debit memos for what I would call "non-ARC matters"
should not be deducted. I believe this excludes back-to-back
ticketing, other creative ticketing, forced fares, incorrect
auto-pricing, invalid waiver codes and churning from the list of
matters that can result in claims against your bond or letter of
credit.
Further, very old debit memos may be invalid claims against your
bond or letter of credit, even if they cover unreported sales or
stolen tickets.
Once a debit memo is older than the statute of limitations for
collection of contract debts, ARC should not be deducting anything.
Because the ARC Agreement states that it is governed by Virginia
law, ARC would probably argue that it could include claims up to
the applicable Virginia statute of limitations, which is five years
from the date the debt arose.
Several ex-ARC agencies have told me that despite the
limitations described above, ARC solicits all kinds of debit memos
from all 150-plus airlines and deducts them from the bond. Further,
I understand that carriers submit disputed debit memos to ARC as
well as debit memos that are more than 5 years old.
If you learn that ARC has made any such deductions, you can file
a complaint with the Travel Agent Arbiter, asking for the refund
due -- plus damages in appropriate cases. As far as I know, no
agency has ever filed such an arbiter case.
Keep in mind that the airlines have no duty to keep debit memos
alive. For example, if you received a debit memo four years ago,
disputed it and have heard nothing since then, the airline still
can ask ARC to deduct it from the bond, and ARC would probably do
so.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the TravelWeekly.com
Legal Ease forum. To contact Mark directly, e-mail him at [email protected].