Mark Pestronk
Q: I have a bunch of questions about the DOT's new rule requiring agencies to make ticket refunds out of their own pockets in certain cases. When does it go into effect? Has anyone sued to stop it from going into effect? Does it apply to all refunds that the consumer is owed? I understand that the "merchant of record" is responsible for refunds, but what does the DOT mean by "merchant of record"? What are the deadlines for making refunds? If an agency makes a refund out of its own pocket, when must the airline reimburse it?
A: The rule's provisions covering ticket refunds go into effect Oct. 26. The DOT delayed the rule so that airlines and agencies can "work together and develop effective communication to ensure that information necessary to process passengers' refunds is transmitted in an accurate and efficient manner."
I wouldn't bet that the "effective communication" processes will be developed in time. I predict chaos that will lead to many agencies deciding to stop selling airline tickets.
The rule requires refunds due to cancellations, significant delays, significantly delayed bags and ancillary services fees not provided. It doesn't apply to voluntary refunds requested by clients.
The refund requirements apply to the agency that issued the ticket only when the agency is the "merchant of record." The DOT defines that term as "the entity responsible for processing payments by consumers for airfare, as shown in the consumer's financial charge statements, such as debit or credit card charge statements."
In other words, if the agency uses its own credit card merchant account to accept a charge for an airline ticket or package containing an airline ticket, then the agency stands in the shoes of the airline and is legally responsible for making the refund.
In addition, according to the DOT, "For transactions paid by a payment other than credit cards or debit cards, the transaction receipt provided to consumers should list the entity that is responsible. In that regard, if the consumer purchased the ticket with cash or check, the entity that issued the receipt should be responsible for refunds."
That is to say, if the client pays by check or cash, the agency is apparently also the merchant of record.
The sentence quoted above is in the DOT's explanation of the new rule, but, oddly, the rule itself does not mention checks or cash in the definition of "merchant of record." In any event, the key word in the explanation appears to be "receipt"; i.e., if the agency issues a receipt in its own name for a sale by check or cash, it comes under the new rule.
For credit card sales, the agency must issue the refund within seven business days after receiving information from the airline and within 20 calendar days for payment by cash, check or debit card.
There is no deadline for the airline to reimburse the agency. Indeed, there is no obligation in the rule for any reimbursement at all. Obviously, very unfair.