New US regulations on flight refunds could require travel agents to refund consumers for cancellations or “significant changes” to flights “regardless of whether the agent is in possession of the funds”.
However, agents would be allowed to charge a fee for processing the refund and to retain any service fee charged at the time of booking the flight.
The US Department of Transportation (DoT) proposes to clarify and toughen the requirements on agents and airlines to pay refunds following complaints about the difficulty of obtaining flight repayments during the Covid-19 pandemic.
If an agent takes payment for a flight and is identified on the consumer’s “financial charge statement” they will be liable for the refund even if the funds have been passed on to the airline.
The proposals are detailed in a Notice of Proposed Rulemaking (NPRM) on Airline Ticket Refunds and Consumer Protections issued by the DoT this month.
The changed rules would apply to all flights or packages sold to the US.
The DoT notes that about 50% of US air tickets are sold through agents and the remainder direct by the carriers, and reports that 17% of the more than 105,000 refund complaints from consumers it received between January 1 2020 and June 30 2021 were against agents and tour operators.
As a result, it argues there is need to strengthen the protections for consumers.
The DoT said: “Consumer complaints have illustrated the difficulty consumers sometimes have in obtaining a refund for a ticket when the consumer does not have the means to determine whether the airline or agent needs to process the refund and which is in possession of the money.”
This has left consumers “forced back and forth between the agent and airline in an effort to chase down their refunds”.
The DoT considered placing the obligation to refund on the entity holding the consumer funds at the time the refund request is made. But it noted this approach “would not necessarily be clear to the consumer because multiple entities may be involved”.
Instead, it proposes to require agents pay “prompt refunds” when an airline cancels or significantly changes a flight itinerary when they sold the flight and the agent’s identity is “shown in the consumer’s financial charge statement, such as debit or credit card charge statements”.
This would apply “irrespective of whether the agent is in possession of the consumer funds at the time of the refund request”.
The DoT also noted: “Many consumers expressed dissatisfaction about agents charging a fee for booking travel that the consumer ultimately did not take and/or charging a fee for the issuance of refunds.”
However, it proposes agents be allowed to charge a service fee for booking travel or issuing refunds and to deduct these amounts from any refund, so long as the fee is charged “on a per-passenger basis” and the fee “was clearly and prominently disclosed” at the time of purchase.
Undisclosed fees would be considered “a deceptive practice”.
The DoT notes agents “do not initiate the cancellation or significant changes that result in a refund being due, nor do agents have any control over the cancellation or significant changes to a flight itinerary”.
It also proposes agents be permitted to retain a service fee charged for issuing a flight ticket at the time of purchase, recognising that agents provide “a service . . . such as specialised knowledge, access to limited availability fares or tools to comparison shop”.
Airlines are not permitted to charge a fee.