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ASTA: Congress Should Act on United’s Credit Card Plan

September 2, 2009 By: George Dooley

ASTA and industry allies recommended Congressional hearings to look more deeply into United Airlines’ credit card merchant fee policy and the consequences for small businesses and consumers if adopted by other airlines at a September 1 briefing for media and Congressional staffs. The Business Travel Coalition (BTC), the Interactive Travel Services Alliance (ITSA) and the National Tour Association (NTA), participated.

At the briefing, Representative Michael Arcuri (D-NY) issued a statement reiterating his belief that United’s policy “threatens to place unnecessary costs and risks on small businesses and consumers across the country,” and stated his intent to pursue the issue further when the Congressional recess ends. Arcuri has been a key player in his support for ASTA and the other industry groups.

Anne Fortney, a partner with Hudson Cook, LLP, and former associate director for credit practices with the Federal Trade Commission’s Bureau of Consumer Protection, noted in her comments that “if a travel agent could not use the airline’s merchant account, the card-issuing bank would chargeback the travel agent’s account, and thus penalize the party that has no responsibility for, or control over, the delivery of the travel services, and the party that would have paid the airline for the services with its own funds. … A bankruptcy involving an airline, cruise line, or other major provider of travel services would destroy travel agencies because they would be unable to withstand the total volume of chargebacks from consumers.”

Paul Ruden, senior vice president of legal and industry affairs for ASTA said, [United's proposed policy] "has all the earmarks of a trial balloon looking for followers – a pattern of behavior familiar to all students of the airline industry. ... The history is that when parallel adoption of policies in the airline industry occurs, it happens fast with no time to legislate solutions before potentially great harm is inflicted or fear of harm begins to disrupt the market. With 88 percent of travel agency sales on credit cards—more than 127 million such transactions in 2008 alone—such actions put millions of consumers at risk.”

Chris Russo, president and chair of ASTA and the owner of Travel Partners, Broomfield, CO, said that United’s plan has the “potential to affect tens of millions of people every year, to the tune of hundreds of millions of dollars in transferred fees. More significant even than this is the dramatic, unprecedented shift in risk that United is proposing to offload not just to travel agents like me, but also to consumers.”

Olga Ramudo, owner of Express Travel (Miami) and one of the agents specifically targeted by United’s policy, stated that should United’s efforts not be curtailed and were other airlines to follow suit, hundreds of agencies would be forced to close their doors in Florida alone, leaving thousands of people unemployed and consumers without access to unbiased travel advice.

Kevin Mitchell, chairman of the BTC, spoke on behalf of the industry partners and set out principles for legislation regarding the issue of credit card cost and risk shift. Among them the ideas that “airlines must remain the merchant-of-record for all air transportation sales on their behalf to ensure the rights of consumers in bankruptcy proceedings are respected” and that “no travel agency should be forced to bear increased costs, the avoidance of which would place the agency in violation of state law.”

Media and Congressional staff also heard from Steve Richer, public affairs advocate for NTA, and Art Sackler, executive director of ITSA. Both groups reaffirmed their organizations’ commitment to resisting the spread of the United model and emphasized the destructive impact the policy would have on their constituencies in the event other airlines follow suit.

ASTA CEO Bill Maloney concluded the event by saying, “Our ‘ask’ is simple: to fully understand both the policy and its consequences, the appropriate committees of Congress should hold hearings in October to explore these issues on the record and consider federal legislative solutions to mitigate the impact.”



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