DOT again rebukes airlines over refunds amid 'unprecedented' spike in complaints

The subject of airlines and refunds for canceled flights has become a hot topic as the coronavirus pandemic has decimated travel in the U.S.

Now it's back in the news after the U.S. Department of Transportation issued a new round of guidance Tuesday.

Airlines have one week to give you your money back if you're entitled to a refund. So says the DOT in a far-reaching FAQ that aims to give travelers guidance on exactly what they're untitled to because of the "impact of the COVID-19 health emergency on air travel."

And, after some airlines have faced repeated complaints from travelers on the subject, it's likely that the FAQ could draw the attention of airline executives, too.

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The DOT made that clear in accompanying the FAQ.

“The Department has received an unprecedented volume of complaints from passengers and is examining this issue closely to ensure that airlines’ policies and practices conform to DOT’s refund rules,” U.S. Secretary of Transportation Elaine Chao said in the statement. “The Department is asking all airlines to revisit their customer service policies and ensure they are as flexible and considerate as possible to the needs of passengers who face financial hardship during this time.”

The DOT had already not-so-gently reminded airlines just last month that passengers flying to, from or within the U.S. are entitled to full refunds if their flights are canceled or "significantly" altered. On Tuesday, the department clarified that most passengers should receive their repayment within seven days.

"Airlines and ticket agents are required to make refunds promptly. For airlines, prompt is defined as being within 7 business days if a passenger paid by credit card, and within 20 days if a passenger paid by cash or check," the DOT said in the FAQ about its refund regulations.

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And that's not all that the DOT weighed in on.

Some airlines — notably Hawaiian and United — have adjusted their cancellation policies during the pandemic to say that passengers with canceled flights would only be entitled to refunds (instead of vouchers) if they were not rebooked on another flight within six hours.

The DOT's thoughts on that? Not OK.

In the footnotes of its FAQ, the agency noted it "would consider a practice of retroactively applying a new definition of cancellation or significant change that disadvantages passengers who purchased tickets under a more generous cancellation or significant change definition to be unfair and deceptive."

Related: 2 U.S. airlines are defying refund rules for canceled flights — here’s how to get yours anyway.

Similarly, the DOT noted "actions by airlines and ticket agents applying changes retroactively to their refund policies" would be covered by the agency's prohibition of unfair or deceptive practices.

Good news for passengers, bad news for airlines.

The department also noted that third-party travel agents are required to make refunds available under the rules, and that airlines and other ticket sellers must notify passengers when they're entitled to get their money back.

More: Delta CEO raises prospect of ‘immunity passports’ for air travel

"Airlines and ticket agents can offer consumers alternatives to a refund, such as credits or vouchers, so long as the option of a refund is also offered and clearly disclosed if the passenger is entitled to a refund," the document said.

While the DOT's latest guidance is certainly passenger-friendly, it's not all good news for would-be travelers.

For starters, the agency reminded travelers that unlike flights canceled by the airlines, cancellations initiated by flyers do require reimbursement.

Guide: How to refund a nonrefundable airline ticket.

"Passengers who purchase a non-refundable ticket on a flight to, within, or from the United States that is still being operated without a significant change, but would like to change or cancel their reservation, are generally not entitled to a refund or a travel voucher for future use on the airline," the DOT said in its FAQ.

"This is true even if the passenger wishes to change or cancel due to concerns related to the COVID-19 public health emergency," the agency added.

The regulator also conceded that airlines may be facing an unusually high volume of refund requests these days in light of the COVID-19 pandemic, and in response, the DOT dulled the blade of its own guidance. The department said while it expects airlines to provide refunds in the appropriate window, it will generally abstain from forcing carriers to adhere to the timeline.

More: Airlines were hesitant to give refunds: now they’re getting sued

"The Aviation Enforcement Office will use its enforcement discretion and not take action against airlines for not processing refunds within the required timeframes if, under the totality of the circumstances, they are making good faith efforts to provide refunds in a timely manner," the DOT said.

Airlines, facing a cash crunch amid virtually nonexistent travel demand, have tried to hold onto whatever funds they could by offering vouchers to travelers who canceled flights, and trying to persuade those whose itineraries qualified for a refund to accept travel credits instead.

Read more: Airlines flew empty flights to get coronavirus aid; now they’re asking Congress for help.

The DOT made clear that coronavirus does not exempt airlines from their obligation to provide refunds to travelers whose flights have been canceled or significantly altered, and this latest update emphasizes that the regulator's position has not changed.