Be careful what you ask for, ASTA.
The new US Department of Transportation (DOT) regulations offer many benefits to travelers, including some for which ASTA has long been lobbying. But at the same time, they hold some pitfalls for unwary travel advisors, ASTA said last week.
Still, though, travel attorney Tom Carpenter told TRO, taking a few cautionary steps can help keep you out of trouble.
“First off, the sky is not falling,” Carpenter says. The initial proposed rule would have required all agencies to issue refunds, even if you did not take any money from your client. But the rule that actually was issued only requires agencies to issue refunds if you are the “merchant of record” on the ticket transaction—”a very narrow universe of agencies and advisors using a GDS to book. But, in this day and age, when most advisors aren’t on a GDS at all, it’s unlikely that your agency is going to be the merchant of record.”
Still, though, he has plenty of advice to offer.
Background of the DOT Ruling
In the unlikely case you haven’t heard, the fuss started on April 24, when DOT issued a ruling that said, among other things, that if a flight is canceled and customers choose not to rebook, airlines—or their merchant of record if there is one—must refund all payments within seven days (New DOT Ruling Guarantees Credit Card Refunds for Canceled Flights within Seven Days and More | Travel Research Online).
The airlines were not happy; in a sharply worded statement, the Airlines for America (A4A) trade group said the “unnecessary regulatory rules issued without collaboration will lead to three things: confusion for consumers, reduction in choice and a decline in competition, which historically drives up prices.”
Neither was ASTA, whose president and CEO Zane Kirby said the airlines made a “profound error in this final rule. Our primary concern for our members has always been the potential that regulations aimed at protecting consumers could harm the small travel agencies who book air tickets. And that is precisely what happened. Travel agencies sold 40 percent of airline tickets in 2023, and the DOT doesn’t understand that in the limited situations where the agency is the merchant of record, payment is immediately passed on to the airline.”
Indeed, Kirby noted, “these types of transactions make up a significant portion of business for many small travel agencies, especially those who specialize in group travel. This is a clear case of a federal agency overcorrecting a problem. Now more than ever, we urge leaders in the House and Senate to maintain Section 710 of the House bill to reauthorize the FAA [H.R. 3935] which ensures ticket agents—nearly 80 percent of whom are female small business owners—are not responsible for providing airline refunds when they are not in possession of the funds.”
Many agencies and hosts agreed.
“This is a classic case of unintended consequences,” says Signature Travel Network president and CEO Alex Sharpe. “But at some point, you just have to wonder when the US (the only G20 country without someone who heads tourism) will wake up. I don’t know folks who aren’t in favor of customer rights or holding airlines accountable, but in their policy making, they have to understand how it gets executed. Frankly, you have to follow the money. Time and time again, the government has looked to introduce laws that protect customers, but in the process put the onus to execute on travel advisors vs. the suppliers. Thank God for ASTA and their advocacy and education. But even after so many years working on the hill, it still feels like ‘ready, fire, aim’ from our lawmakers.”
“This is certainly likely to reduce and restrict when I am willing to include air,” says Susie Conger, owner of Cruisy Susie & Crew – CruiseOne. “I see a separate T&C disclosure form being required that directly deals with booking air; I was thinking similar to having waiver of insurance coverage, I may need to investigate disclosing why or when our agency will/will not deal with clients’ air. DOT says I cannot include ‘opt-out’ insurance in a package … but I can use Non Qualified Client terms in regards to doing business with my agency IF no proof of insurance is provided. Making it less fun to deal with the casual traveler.”
At Oasis Travel Network, SVP Jill La Barre agreed. “It’s encouraging to see the Department of Transportation is holding the airlines responsible for providing refunds when they have failed to provide the services purchased. After all of ASTA’s efforts, it’s disappointing to have come to light, the DOT still does not understand the role of a travel agency, the payment of funds to a supplier and their overall role in providing services to a traveler, both corporate and leisure,” she said.
“We want to see consumers protected—but the small business owner should also be protected as well. How can our government not comprehend the agency is not in possession of money? It has been passed on to the product provider. It seems a simple concept the mighty politicos are unable to grasp. We are hopeful ASTA will be able to continue the process of advocating for the Travel Agency community and try to educate those in authority of the financial reality of providing travel services. The good work of protecting consumers with an owed refund should not come at the cost of jeopardizing a small business owner due to lack of comprehension in Washington DC.”
Indeed, says travel advisor Tony Day, owner of Toni Tours, the new regulations will mean a loss for her group customers, “as group fares, especially in business class, were typically better than purchasing as individual tickets. But because of this rule, I will no longer do group tickets through the airlines, which typically required agency check or agency credit card to pay for all the tickets and the clients would pay me directly for the tickets. Since I can’t control when the airline might reimburse me for the tickets, I don’t want to get stuck with having to return money to clients and wait for airline to refund me.
So what’s a travel advisor to do in the meantime?
In his New York-based law office, Carpenter agreed that most travelers don’t understand the role of the travel advisor as a booking agent; “they often think they’re buying the trip from the agency, rather than from the supplier, with the agency as the middleman.”
For that reason, he suggests that agencies take the following steps in the next 60 days:
- Stop taking direct payments. “Most host agency agreements prohibit agencies from taking net rates and marking them up and it was already riddled with legal risk to do that, but this regulation could create even more risk for agencies that handle client funds. For those agencies that might be inclined to take a bunch of net rates, bundle it together and then charge your client in one transaction, with the money flowing through your bank accounts—I’d strongly recommend against that. Stay in your lane. Use your clients’ credit cards to make payments directly with suppliers, even if it means that you’re running a bunch of small charges,” he says.
- Review your terms and conditions document. “There should be a clear statement in any terms document where your client agrees that they understand that you are functioning solely as the booking agent, and not the supplier. I’d also recommend having a provision where the client acknowledges that the air ticket is a contract between the passenger and the airline, including a statement that the client acknowledges that the agency is not the merchant of record for airline transactions.”
- Look at your workflow when you’re selling airline tickets. “Make sure you’re getting a credit card authorization for each and every transaction, that your clients are agreeing to your terms and conditions as part of that transaction, and that you’re using the correct and proper language to protect your agency from a chargeback.”
Cheryl’s 40-year career in journalism is bookended by roles in the travel industry, including Executive Editor of Business Travel News in the 1990s, and recently, Editor in Chief of Travel Market Report and admin of Cheryl Rosen’s Group for Travel Professionals, a news and support group on Facebook. As an independent contractor since retiring from the 9-to-5 to travel more, she has written regular articles about the life and business of travel agents for Luxury Travel Advisor, Travel Agent, and Insider Travel Report. She also writes and edits for professional publications in the financial services, business, and technology sectors.
