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United Faces Tough Opposition to Shift of Credit Card Fees

September 1, 2009 By: George Dooley

United Airlines' attempt to shift credit card fees and risks onto travel agents is bad for the economy, bad for the travel agency community, and bad for consumers, ASTA argued at a briefing for media and Congressional staff. United may in fact face tough going legally and in Congress as opposition to United’s policy continues to mount.

ASTA’s briefing on air travel merchant fees underscored United Airlines' efforts to shift the cost of merchant fees and the associated risk to travel agents and consumers. In essence United is offloading its credit card fees onto consumers through travel agents, many of whom may be forced out of business should United succeed.

Agents, ASTA said, will have no choice but to increase the fees they charge consumers to cover costs, even though in 10 states (California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Maine, New York, Oklahoma and Texas), travel agents and other retailers are prohibited by state law from passing on surcharges to consumers, forcing agents to shoulder these burdensome costs.

“Given the level of concern engendered by United’s policy and the limited gain it provides, we would have hoped by now that United would reconsider and that the other airlines would provide some reassurance that they did not intend to impose theses new problems,” ASTA’s Paul Ruden, senior vice president of legal and industry affairs, said. “But, with two exceptions, they haven’t and there are no signs that they will, so the task falls to Congress, we believe, to protect consumers form the consequences of these policies before it is too late.”

ASTA noted that 88 percent of travel agency sales are on credit cards and over 127 million transactions were made in 2008 alone.

One result was that ASTA and its allies, the Business Travel Coalition (BTC), the Interactive Travel Services Association (IASA) and the National Tour Association (NTA), advanced key principles for legislation regarding the issue of credit card cost and risk shift.

“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; the legally responsible airline is the one that the consumer believes is the service provider even if the contractual obligations will have been fulfilled by code-share partners or subcontractors,” ASTA said. "Consumer protections vis-à-vis airlines must be guaranteed when consumers purchase commercial air transportation services through travel agencies that neither take legal ownership of services nor control their delivery or performance obligations as required by the Federal Aviation Administration or codified in airlines’ contracts of carriage. No travel agency should be forced to bear increased costs the avoidance of which would place the agency in violation of state law; if necessary, state laws inhibiting freedom of commercial action should be preempted.”

Participants included Anne Fortney, partner at Hudson Cook, LLP and former associate director for credit practices for the Bureau of Consumer Protection of the Federal Trade Commission (FTC), who offered a legal/regulatory perspective and the implications under the Federal Fair Credit Billing Act. Kevin Mitchell, chairman, of the BTC, reviewed core principles to guide future industry reforms

Chris Russo, president and chair, ASTA, detailed the industry response to date and ASTA’s grassroots effort to oppose United’s policy.

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