The DOT’s new refund rule that will come into effect on Oct. 26 has raised several questions regarding how it applies to corporate travel, meetings, and incentives. One of the common concerns is whether travel agencies would be responsible for refunds for canceled and delayed flights if their corporate or institutional clients pay by check or wire transfer after ticket issuance.
According to the rule, the refund obligation applies to the “merchant of record,” which is defined as the entity responsible for processing payments by consumers for airfare. This definition is crucial in determining whether a travel agency falls under the rule’s jurisdiction.
While it may initially appear that travel agencies are not the merchant of record when clients make payments other than credit cards, such as cash, check, or wire transfer, the DOT’s explanatory statement suggests a broader interpretation. The statement indicates that if a receipt is issued for cash, check, or wire transactions, the entity providing the receipt would be responsible for refunds.
To potentially avoid the rule’s refund obligations, travel agencies could explore alternatives to issuing receipts for transactions involving cash deposits or payments made by means other than credit cards or debit cards. Instead of providing individual receipts for each ticket purchased using a cash deposit, agencies could opt for a consolidated weekly report of deductions from the deposit, thereby circumventing the receipt issuance.
Paying airlines with the agency’s credit card or the owner’s credit card does not exempt travel agencies from the refund rule. The key factor is how the consumer pays the agency, not how the agency pays the airline. Moreover, unauthorized use of personal credit cards for airline payments may violate industry regulations and expose agencies to additional liabilities.
It is worth noting that the DOT’s use of the term “consumers” in the rule does not explicitly include businesses or institutions. Therefore, agencies dealing primarily with corporate travel or institutional clients should seek further clarification on their obligations under the refund rule.
Understanding the DOT’s new refund rule and its implications for corporate travel, meetings, and incentives is crucial for travel agencies to navigate compliance effectively. By dissecting the definition of the “merchant of record,” considering alternative payment practices, and adhering to industry regulations, agencies can mitigate risks and ensure seamless operations in light of the regulatory changes.