The Department of Transportation Speaks on Mistake Fares

The Department of Transportation (DOT) responded to a series of TPG Contributor Mitch Berman's specific questions regarding a new policy that allows airlines to cancel mistake fares. Here's how the DOT responded.

The DOT established a new interim policy on May 8, 2015 (PDF link) which allows airlines to cancel “mistaken fares” under certain circumstances, provided they offer specific protections to the consumer. Under this new policy, airlines may now cancel mistake fares if they reimburse travelers not only for the canceled ticket itself, but also for any out-of-pocket travel expenses made in connection with the canceled ticket. We've reported several times on the policy, including the way it played out in practice and the legal remedies available to travelers.

Both the policy itself and the way these reimbursements were being made (and not made) by major airlines like American gave rise to several questions. So we asked those questions of the DOT. These are the responses we received, authored by Stuart Hindman, a DOT trial attorney.

Below, you'll find my questions along with the answers provided by Mr. Hindman.

I am writing to find out if the final policy you mention in the 5/8/15 notice “Enforcement Policy Regarding Mistaken Fares” which went out over your signature has been promulgated, and if not, to find out informally when you anticipate it might be promulgated.

Answer: The issue of mistaken fares is currently the subject of an open rulemaking by the Department, Airline Pricing Transparency and Other Consumer Protection Issues (“Consumer Rule III”). The mistaken fares enforcement policy issued by the Office of Aviation Enforcement and Proceedings (“Enforcement Office”) on May 8, 2015, is temporary pending the outcome of that rulemaking. We anticipate a final rule to be issued in June 2016. You can follow the status of the rulemaking through the Department’s monthly status report on significant rulemakings located [here].

The travel community has been very concerned about the looseness of the language regarding the required reimbursements for travel expenditures related to the mistaken fares, and the way the airlines have not been making those reimbursements in a timely fashion. We are interested in whether or not the DOT plans to provide those provisions with teeth and an easier-to-use consumer interface, followed up with prompt enforcement.

Answer: DOT is addressing the issue of mistaken fares through rulemaking. In the interim, as stated in the Enforcement Policy, the Enforcement Office is not requiring airlines to honor mistaken fares so long as the airline (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket. If the consumer is not satisfied with the reimbursement provided by the airline, the consumer may contact the Department’s Aviation Consumer Protection Division to file a complaint. Based upon the result of the rulemaking, additional information will be available when the rule is finalized.

What’s in place internally at the DOT (or if nothing currently, what might we see in the final version) in terms of a deadline for the airline to issue a reimbursement check for the ticket itself?

Answer: When ticket refunds are due, an airline must refund the purchase price for a ticket within 7 days of receiving a complete refund request for credit card purchases or 20 days for cash and check payments consistent with 14 CFR 259.5(b)(5).

What’s in place internally at the DOT (or if nothing currently, what might we see in the final version) in terms of a deadline for the airline to issue a reimbursement for the out-of-pocket expenses proven by the customer?

Answer: The May 8 policy includes no fixed deadline for an airline to issue reimbursement to a consumer. However, we expect that an airline should be providing the reimbursement within a reasonable period of time once the passenger has provided all necessary documents to the airline to justify the reimbursement. We view the length of time to provide the reimbursement similar to the "reasonable time" requirement for settling a claim for mishandled baggage. Generally, it takes an airline a month or so to pay passengers for their lost or damaged luggage.

Might a consumer have a valid claim that he had not been “made whole” within the meaning of the interim policy if, for pertinent example, American Airlines had waited so long to reimburse him that he lost hundreds of dollars on exchange rate changes from when he first purchased the tickets?

Answer: We review each complaint on a case-by-case basis to determine if an airline has complied with the Enforcement Policy for reimbursements from a mistaken fare situation. If a consumer believes they have not been made whole, they are free to file a complaint with the Aviation Consumer Protection Division.

Bottom Line

So there you have it. We appreciate the DOT clarifying its policies, and thanks to this response we now know that airlines will have to reimburse passengers for mistake fares within a specific time period. Plus, these answers indicate that the DOT may be willing to consider the concept of "making the consumer whole" very broadly — which is potentially great news for consumers who purchase a mistake fare and incur related travel expenses only for the ticket to be canceled.

Feel free to share your thoughts on the DOT's answers in the comments below!

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