More Backlash Regarding Credit Card Fees

Lots of commentary & backlash regarding United Airline's announcement a week ago that selected travel agencies would be required to process credit cards through their own merchant accounts:

United is hoping to shift the cost of accepting credit and debit cards onto selected travel agencies. Those agencies say the airline’s move shifts to them the risk for paying out refunds if the carrier goes bankrupt. While it’s also likely to reduce the amount of money that United has to keep in the bank to guard against charge-backs [see this blog post: Cash Squeeze Predicted for United Airlines], it would increase those requirements for the travel agents.

That’s a nonstarter for most agencies — and their banks, which would have to honor charge-back requests that could total billions of dollars in the event of an airline bankruptcy.

Source: United credit card policy could foul corporate travel

This will also make it difficult for many corporate customers to get their negotiated discounts unless they pash cash or their corporate travel agency is willing to underwrite the risk of chargebacks:

One travel agency estimated the potential costs at $20 per reservation, which would have to be passed back to the consumer:

The agents also are describing it as a "smoke signal" inviting other airlines to follow suit, a scenario that could raise antitrust issues. The American Society of Travel Agents urged officials at the Department of Justice this week to watch for possible collusion among airlines, Paul Ruden, the trade group's lawyer, said on Wednesday. Ruden said he knows of "approximately a dozen" travel agencies that received letters from United over the past two weeks.

"It is clearly a test," he said, saying the targeted travel agencies do little business with United, so the airline would see no meaningful savings in card fees.

...

Most agencies do not have a merchant account to charge a $700 ticket," Ardis said. "They would have to find a new merchant account that would allow them to charge that much." And some lack the financial wherewithal to qualify for such an account.

Making reservations through united.com is not an attractive option for agents because they would lose some of their ability to provide custom service, which is their main appeal, Ardis said.

For example, it would be harder to arrange inter-line flights, which are flights with connections on different airlines that do not have code-sharing agreements, and agents would lose flexibility to make last-minute changes in itineraries without the customer incurring airline penalty fees, Ardis said.

Source: Airline lands card fees on some travel agents

United's explanation:

"Credit card processing costs are escalating at a high rate," says United spokeswoman Robin Urbanski, noting that United's distribution costs, which include credit card fees, totaled $710 million last year. "We're continuing to explore ways in the current economic environment to reduce our costs and run an efficient airline."

Source: United: Travel agents must pay credit card fees on flights sold

Other sources:

Will Airlines Push Travel Sites to Pay Credit-Card Fees?

United Airlines’ new credit card fee transfer comes under fire

United terminates some agents' right to process its credit card transactions

United Airlines enrages travel agents with new credit card restrictions

United set to make select agents pay for card transactions

United announces policy change in credit card processing expenses