Mark Pestronk
Mark Pestronk

Q: With all the tens of thousands of consumers who had to settle for future travel credits instead of refunds, I am surprised that no government agency like the DOT has prosecuted any tour operator, cruise line or airline for failure to make refunds. Have you heard of any such prosecutions, and if so, what lessons do they have for the industry?

A: The DOT has filed a formal complaint against Air Canada, which is defending its case. The agency has taken no formal action against any other carrier or any tour operator, and it has no jurisdiction over cruise lines. The Federal Maritime Commission, which has authority over the U.S. selling practices of cruise lines, has not taken enforcement action against any cruise line.

The only federal or state proceeding against a tour operator that I could find is one brought by the California attorney general against a Colorado company called Voyageurs International. The operator canceled a 2020 summer tour for California high school students called Ambassadors of Music and gave only partial refunds and no future credits. The operator cited the tour participant agreement, which apparently provided for only partial refunds.

In settling the case for full refunds, the California attorney general issued a press release stating, "Travel agents doing business in California must refund all payments made by consumers within 30 days of the agent's cancellation, regardless of the terms of their cancellation policy, with certain exceptions."

The phrase "with certain exceptions" refers to the two exceptions in the California seller of travel law. The biggest one, which all retailers and most tour operators can take advantage of most of the time, is that the mandatory refund rule does not apply if the seller has already disbursed the money to suppliers and can provide bank records proving it. In that case, the seller of travel is only required to provide customers with a statement that the funds were dispersed for the full payment of the trip, along with proof of their seller of travel registration.

The other exception, which is buried in a section of the law not related to refunds, is that the operator does not have to provide a refund if "the passenger otherwise advises the seller of travel in writing, after cancellation." In other words, if you agree to a future travel credit, the operator is excused from having to make any refund.

Washington state has a similar seller of travel law, but in the other 48 states (including Florida and Hawaii, which also have seller of travel laws), refunds are entirely governed by the agreement between the operator and the participant.

It is interesting that the California attorney general used the term "travel agents" and not "tour operators," which is what Voyageurs clearly was. It shows that the rights and duties of agencies and operators are the really the same under California and other U.S. laws, unlike other countries' laws, where the legal distinction is clear and important.

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