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New DOT Rule Requires Airlines to Issue Refunds Quickly

The Department of Transportation also targets ‘junk fees’ in latest guidance

spinner image pink purse with hundred dollar bills folded as airplanes inside and outside of it
The Department of Transportation announced it will require airlines to automatically refund passengers’ money for canceled or significantly delayed flights.
The Voorhes/Gallery Stock

The U.S. Department of Transportation (DOT) issued a rule Wednesday that requires airlines to automatically provide passengers with cash refunds when they are owed and to better disclose fees, sometimes called surprise or “junk” fees, during the ticketing process.

“Passengers deserve to know upfront what costs they are facing and should get their money back when an airline owes them — without having to ask,” U.S. Transportation Secretary Pete Buttigieg said in a statement, adding that airlines will be required to reveal costs before a ticket is purchased. The secretary said the new rule will save passengers time and money.

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In addition, the rule codifies what is considered a “significant change.” Under current regulations, airlines decide how long a delay must last before triggering refunds. According to the DOT’s rule, significant changes to a flight include departure or arrival times that exceed three hours for domestic travel and six hours for international travel; departures or arrivals from a different airport; passengers downgraded to a lower class; an increase in the number of connections; connections at different airports; or trips on planes that are less accessible for a person with a disability.

Airlines still will be allowed to offer another flight or a travel credit instead of a refund, but consumers can reject the offer.

The rule will also apply to refunds of checked-bag fees if the bag isn’t delivered within 12 hours for domestic flights or 15 to 30 hours for international flights for passengers who submit a mishandled baggage report. And it will apply to fees for things such as seat selection or an internet connection if the airline fails to provide the service.

The DOT requires refunds to be:

  • Automatic: Passengers shouldn’t have to ask for a refund or fill out paperwork.
  • Prompt: Refunds must be issued within seven business days for credit card purchases and 20 calendar days for other payments.
  • Cash or the original form of payment.
  • The full amount, including all taxes and fees.

Complaints about refunds skyrocketed during the COVID-19 pandemic as airlines canceled flights. Even when they didn’t, many people didn’t feel safe sharing a plane cabin with other passengers. Flights were also canceled as more passengers returned to the skies after the pandemic.

In a statement, a spokesperson for Airlines for America, a lobbying organization for major airlines, said members offer a range of options — including fully refundable fares. The organization said that from January 2020 to December 2023, the 11 largest U.S. passenger airlines issued customer refunds in the amount of $43 billion.

As for the surprise fees, the rule requires airlines and travel agents to disclose at the outset the costs for a carry-on bag, checked bags, changing a reservation or canceling one.

The DOT said the rule will save consumers more than $500 million a year.

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In a letter last year, AARP called on DOT to quickly finalize and strengthen a rule on hidden airline fees, such as those assessed for changing or canceling a flight, seating a young child next to an accompanying adult or checking additional luggage.

“AARP applauds the DOT’s decision to protect airline passengers, many of whom are older adults, from numerous hidden fees,” says Debra Alvarez, AARP’s government affairs director for livable communities. “AARP has a long history of advocating for affordable, reliable transportation options. As more families take advantage of the upcoming travel season, it’s good to know they will be able to make informed decisions about how to allocate their travel budgets without being charged unexpected and unfair airline fees.”

The new rules will take effect over the next two years.

This isn’t the first rule targeting airlines this year. In February, DOT proposed improving the flying experience for passengers who use wheelchairs.

Contributing: The Associated Press

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