Here’s how you can avoid being the ‘merchant of record’: Travel Weekly

Mark Pestronk

Q: In last week’s Legal Briefs column, you answered a bunch of questions about the DOT’s new refund rule that will go into effect on Oct. 26. I have few more questions about how the rule applies to corporate travel, meetings and incentives. First, a few of our corporate and institutional clients pay us by check or wire transfer after we issue tickets. Would we be responsible for refunds for canceled and delayed flights? Second, what if the corporation pays us by making a cash deposit that we use to pay for each ticket? Third, what if we paid the airline using our agency’s own credit card or the credit card of the agency’s owner?

A: As you know, the refund obligation applies to you when you are the “merchant of record.” The rule defines that term as “the entity responsible for processing payments by consumers for airfare, as shown in the consumer’s financial charge statements, such as debit or credit card charge statements.”

At first blush, it would seem that, if a client makes a cash, check or wire payment, you aren’t the merchant of record because there is no “financial charge statement.” If that is correct, then the rule doesn’t apply.

However, the DOT’s explanatory statement, which is the 245-page document that precedes the 27-page rule for airlines and travel agencies, suggests that the DOT’s view is broader: “For transactions paid by a payment other than credit cards or debit cards, the transaction receipt provided to consumers should list the entity that is responsible. In that regard, if the consumer purchased the ticket with cash or check, the entity that issued the receipt should be responsible for refunds.”

In other words, the DOT apparently interprets its rule to mean that if you issue a receipt for cash, check or wire, then you are the merchant of record. So, if you can avoid issuing anything called or amounting to a “receipt,” you may be able to avoid the rule’s refund obligations.

Second, if the corporation makes a large cash deposit for many tickets for its travelers or meetings invitees, you could acknowledge the deposit without issuing a receipt for each ticket. You could then provide a weekly report of deductions from the deposit, and the report would not be a “receipt,” either.

Third, paying the airline with the credit card of the agency or its owner will not allow you to avoid the rule’s obligations, as what counts is how the consumer pays you, not how you pay the airline. Further, unless you have the plating carrier’s permission to use your own credit card, such payment violates an ARC rule of long standing.

Finally, sharp readers will have already noticed that the DOT uses the word “consumers” in the long quote above, which, in its usual meaning, does not include businesses or institutions. However, my view is that the DOT intends that the benefits of the rule apply to any person or entity that pays for an airline ticket.