ASTA: DOT Must Remove Agent Responsibility for Refunds From NPRM

Earlier this summer, the U.S. Department of Transportation (DOT) issued a notice of proposed rulemaking (NPRM), titled “Airline Ticket Refunds and Consumer Protections,” that intended to further strengthen travelers’ rights when seeking refunds when airlines cancel or delay flights.

The regulations would make air carriers and ticket agents responsible for providing “non-expiring travel vouchers or credits to consumers holding non-refundable tickets for scheduled flights to, from, or within the United States” as a result of the airline making “a significant change to a scheduled flight,” “a serious communicable disease” or several other reasons. Air carriers and ticket agents would be responsible for providing refunds if they “received significant financial assistance from the government as a result of a public health emergency.”

On Tuesday, August 23, American Society of Travel Advisors (ASTA) CEO Zane Kerby appeared before the DOT Aviation Consumer Protection Advisory Committee to address concerns the trade group has over some of the provisions of the NPRM.

Said Kerby in his prepared remarks: “We appreciate the Department’s focus on improving the airline refund system, which has been a particular pain point for agencies and their clients since the onset of COVID-19. While we supported several provisions that ended up in the [NPRM], we have concerns about one element. That is: DOT’s proposal to require travel agencies (or ‘ticket agents’ under the statute) to provide consumer refunds when an airline has canceled/changed a flight and the consumers finds the alternative transportation unacceptable, regardless of whether or not the agent is in possession of the funds.”

Kerby noted that ASTA questions both the fairness and practicality of the provision, stating:

  1. “It is exceedingly rare for an agency to handle client funds in air transactions and thus are not in a position to issue a refund, and
  2. “Agencies have no control over the alternative transportation offered to the consumer.”

He also noted that “even if agencies wanted to hold client funds,” in most cases it is impossible to do so as stated by rules issued by Airlines Reporting Corporation (ARC), the settlement system through which virtually all travel agency transactions flow. Meaning: Agencies are prohibited from “using any credit card, which is issued in the name of the agent or … in the name of any third party, for the purchase of air transportation for sale or resale to other persons.” For cash transactions, funds are deducted from the agency’s bank account at settlement, which occurs on a weekly basis.

“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,” continued Kerby. “It could also prove to be such a financial risk that many agencies elect to no longer sell air tickets, depriving consumers of valuable consultatory services and comparative shopping options.”

He added that travel agencies “are a vital distribution channel” and were responsible for the sale of over 640,000 air tickets per day in the United States in July 2022 alone.

Kerby closed his remarks by saying ASTA is still reviewing the entirety of the NPRM and will be filing comments when it has finished—"but for now,” he said, “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.”

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