At DOT, ASTA lays out opposition to air-ticket refund plan

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ASTA executives earlier this week appeared at a meeting of the DOT Aviation Consumer Protection Advisory Committee to discuss a proposed rulemaking that would put some travel advisors "on the hook" for air-ticket refunds.
ASTA executives earlier this week appeared at a meeting of the DOT Aviation Consumer Protection Advisory Committee to discuss a proposed rulemaking that would put some travel advisors "on the hook" for air-ticket refunds. Photo Credit: Mark Van Scyoc/Shutterstock.com

SAN FRANCISCO -- ASTA is in active communication with the Department of Transportation to advocate for travel advisors on the issue of airline refunds, and it seeks to ensure that travel agencies are not responsible for refunds of tickets regardless of whether they possess the funds.

The DOT has proposed regulations that would make it a responsibility of  agencies to provide consumer refunds if airline changes or cancels a flight and the alternatives offered are unacceptable to the consumer.

During a press conference at this year's Global Convention, ASTA president and CEO Zane Kerby said what was once "a very large problem" is now "much smaller than we originally anticipated."

Eben Peck, ASTA's executive vice president of advocacy, said that it initially seemed as if the rulemaking would require agents to be potentially responsible for refunds for every transaction. Now, though, it appears agents would only be "on the hook" if they are the merchant of record in a transaction, which appears to be rare.

ASTA is in the process of determining exactly how rare that is, but it said in the "vast majority" of cases agents are not the merchant of record. In most cases, it said, consumer funds go to the airlines through ARC.

ASTA's position on the rule

Kerby and Peck earlier this week appeared at a meeting of the DOT Aviation Consumer Protection Advisory Committee to discuss ASTA's position. According to comments provided by ASTA, Kerby told the committee that ASTA was supportive of several of the provisions within the latest rulemaking but took issue with the requirement that agencies, referred to in the rulemaking as "ticket agents," provide refunds whether or not they possess the funds."

"Even if agencies wanted to hold client funds -- and thus be in a position to promptly issue refunds-- in the vast majority of cases it is impossible to do so under rules issued by ARC, the settlement system through which virtually all travel agency transactions flow," Kerby told the committee.

Further, Kerby said, travel agencies do not in practice withhold consumer refunds. The DOT has not taken any enforcement action against agents regarding refunds since at least 2003, which is as far back as the DOT's website of enforcement orders goes.

"The prospect of being 'on the hook' for refunds regardless of whether the agency has access to the funds in question could disrupt the airline distribution system in unknowable and unpleasant ways," Kerby told the committee.

It could drive some agencies to stop selling air tickets, robbing consumers of their advice and opportunities for comparison shopping, he added.

The current rule's language

Mark Pestronk, who writes the Legal Briefs column for Travel Weekly and has recently addressed the refund rule, said he disagreed with the interpretation that agents would be on the hook only if they were the merchant of record.

"Based on the DOT's officials' questions at the Aug. 22 hearing, I can understand that ASTA's representatives may have gotten the impression that the refund duty will apply only to an agency that is the credit card merchant for a ticket," Pestronk said.

"However, that's not what the proposed rule itself says."

Peck agreed that it was not in the proposed rule text but that revised regulation language would clarify and narrow the definition. If adopted, the requirements would only apply to a ticket agent if their "identities are shown in the consumer's financial charge statements, such as debit or credit charge statements ... conversely, if according to the financial statements provided to consumers, an airline is identified as the recipient of the consumer funds in a transaction facilitated by a ticket agent, the airline would be under the obligation to provide the requested refunds."

Peck also said that language to hold agents accountable for refunds only if they were the merchant of record was mentioned several times during the committee hearing.

Next steps

The public comment period on the rulemaking is open until Nov. 21. ASTA will be filing comments.

"But for now we urge the department in the strongest possible terms to eliminate from the proposal any obligation of a ticket agent to issue a consumer refund where the agency does not control the funds in question," Kerby said.

During the press conference, Peck said ASTA will continue to work with members to determine what exactly to propose in its comments.

After the public comment period closes, the DOT will consider the comments and issue its final ruling. That rule will be effective 90 days after it is published.

Update: This report was updated on Aug. 26 to add comments about the rule's language from Mark Pestronk and Eben Peck.

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