The U.S. Department of Transportation (DoT) Has Clarified That Airlines Must Promptly Refund Passengers Within 7 Days if the airline cancelled the passenger's flight, the passenger paid with a credit card, and the passenger has chosen a refund (instead of a travel voucher or rescheduling the flight).
The DoT issued this clarification and others after receiving over 25,000 complaints in March-April 2020, many of them over refunds. In a typical month before the coronavirus / COVID-19, the DoT used to receive ~1500 air travel complaints per month.
Airlines Must Honor the Refund Policy in Place at the Time of Booking
Airlines such as United have been schizophrenic, changing their cancellation multiple times since early March (see United Schedule Change Refund Policy: 25 Hours; United New Schedule Change Policy: Refund After 1 Year; United Travel Credits Valid 24 Months, Full Refund for 2 Hour Delays). That's begged the question: if a passenger booked a flight before the pandemic, can an airline retroactively change its refund policy, for example increasing the amount of time a schedule change must be in order to have the option of a refund? After all, the DoT does not define “significant change.”
Fortunately, the answer is: No. Airlines must abide by the policy in place at the time the ticket was booked.
May an Airline Offer Travel Vouchers or Credits Instead of Refunds?
U.S. airlines, on the question of refunds, are a little like a child who keeps asking the same question, hoping that the answer will be different. But the DoT is unambiguous: if an airline cancels or significantly changes a passenger's flight, and the passenger chooses not to accept an alternative offered by the airline, the passenger is entitled to a full refund.
How Long Can an Airline Take to Provide a Refund?
Per the DoT's new guidance, airlines must provide refunds promptly after an eligible passenger opts for a refund. Prompt is defined as 7 business days if the passenger paid by credit card, and 20 business days if the passenger paid by cash or check.
That said, at least initially, the DoT Enforcement Office will use its discretion and not take action against airlines that take a longer time to process refunds, if they are seen to be making “good faith efforts to provide refunds in a timely manner.”
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