What happens when you buy a ticket for a cruise, airline flight or an organized tour — and then cancel? Do you — or perhaps more appropriately, can you — get your money back? What's the true meaning of "nonrefundable"? And what about undisclosed service fees and charges? Or taxes? Should you be taxed for something you didn't actually use?
For starters, we're talking about hundreds and hundreds of millions of dollars and who — legitimately — deserves them.
I start with the story of the dream trip that wasn't. This story appeared late last year in the Washington Post, written by reporter Cindy Loose.
It's all about an elderly woman who purchased a cruise from Princess Cruise Lines. But she didn't just purchase the cruise through the cruise line, she also purchased her air travel and all other aspects of the cruise — shore excursions, port fees, surcharges and taxes, directly from Princess. And when the cruise line sent her on an absurd air itinerary with numerous hard-to-make connections and she missed her cruise, things got ugly.
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From Cindy Loose's story: "The 78-year-old woman, who lives on a Social Security pension, missed the Alaska cruise she'd spent 10 years dreaming about. Princess Cruises kept not only the $2,500 she had paid for the cruise and airfare, but also the $559.80 the airlines refunded because the woman missed the last flight to her cruise.
The woman didn't know until after she'd paid and her tickets had arrived that she was being sent to Anchorage in a roundabout way on three airlines, with three legs in each direction. That's according to her daughter, who asked that her mother's name not be used because she'd suffered enough, and 'I don't want people asking her about it and making her rehash it over and over.' Seeing the difficult flight route, the daughter tried to talk her out of going, but the woman insisted she'd make the best of it.
The woman arrived at 6:30 a.m. at BWI Airport for the first of her May 19 flights to her cruise. She and an elderly friend got to Minneapolis just fine. But the Northwest flight to Seattle was delayed by mechanical problems, causing the two women to miss their connection to Anchorage.
In Seattle, Northwest agents urged the two women and about 25 other passengers to run and try to make an Alaska Air flight, the woman said. But that Alaska Air flight to Anchorage was full. So was the next one. Finally, the women were boarded on a third flight.
But after they'd settled in, an Alaska Air attendant told them they had to get off the plane because two of the airline's own passengers had just shown up. Two young people were so sympathetic to the elderly travelers that they offered to give up their seats, saying they lived in Anchorage and were in no hurry. But 'the flight attendant was adamant that we should de-board the plane' and wouldn't allow the switch, the woman said. She wanted to call her daughter back in Washington but couldn't figure out how to use pay phones that required credit cards. She said two Alaska Air representatives refused to allow her to use company phones for a long-distance call. Moments later, the woman's traveling companion had an asthma attack.
Near midnight, the two finally made their way back to the Northwest terminal. Northwest offered to put them in a hotel and fly them to meet their ship at another port the following day. 'At this point my body was weak, I had a severe headache and was so tired and confused I could not think. I would miss the glaciers, the part of the trip I was most excited about, and I was too exhausted mentally and physically to continue.' Instead, Northwest flew them home without charge." (Read the entire Washington Post article here)
Loose reported that the woman's daughter had been fighting — since last May — for a refund from Princess as well as a refund for the unused air tickets.
Princess Cruises took a very hard line in this case, claiming that under its stated refund policies, since the woman essentially canceled her cruise within 30 days, that she was entitled to no refund. It would stick to its contract stating the woman would lose 100 percent of her payment.
Loose did some additional digging and discovered that United Airlines did refund the unused ticket money — to Princess!
When Washington Post readers read this sad tale, the response was intense and immediate. Dozens of readers wrote letters and sent money — ranging from $9 to one couple who sent thousands so that the elderly woman could not only take her dream cruise, but also take a friend.
It was the kindness of strangers to the rescue — Princess, only under pressure, refunded the taxes and fees to the 78-year-old woman. But the story became ground zero in the discussion of refund policies and what travelers are entitled to receive.
In the case of the 78-year-old woman, getting a refund proved nearly impossible because the cruise line has a stated policy in its contract that if you cancel for any reason within a specified period of time, you get absolutely nothing back. Translation: You need to buy trip cancellation and interruption insurance.
But there are three issues here that are worth noting, because they apply to all of us. The woman had purchased everything related to her cruise — including her airfare — through Princess. She had, in effect, relied upon Princess to her detriment (in legal terms, it's called detrimental reliance,and more on this later). Had she bought her own airfare separately and then missed her connections, then by all accounts she would have been completely without legal standing, unless she had bought trip cancellation/interruption insurance.
Second, she had never flown on her trip on United, and hadn't used the bulk of her tickets.
If the airline had then refunded that ticket price to Princess, why didn't Princess then refund that money to the woman? In the end, when the Washington Post uncovered the fact that Northwest did, in fact, refund that money, only then did Princess announce it would send the woman a check for a few hundred dollars.
And third, this woman not only paid for her trip, she paid port fees (these are per-head fees that are assessed on a cruise ship by individual ports based on the number of passengers on board), government fees, shore excursion fees, surcharges and taxes — all for things she never got. What happened to all of that money? The cruise line simply kept it!
We checked with the Federal Trade Commission, the U.S. Department of the Treasury and individual state tax departments to find out where the money goes — and each reported that the taxes should be refunded regardless of a cruise line's refund policy — to the passenger.
How much money are we talking about? It's huge.
And it's not just the cruise lines. It's tour operators, airlines and other travel providers. When someone cancels, what happens to all those fees and taxes, and why aren't they given back to consumers?
It seems the industry, as a whole, doesn't want to provide many answers.
If you buy a fully refundable airline ticket, the price is broken down between the base price of the ticket and the taxes and government fees. If you don't use the ticket, you get the full amount back. But what if you buy a "nonrefundable" ticket and don't use it? Do you at least get your taxes back? You don't. According to the IRS and the airlines, under most nonrefundable policies, the ticket is deemed "used" the minute you buy it, not when you use it. And the airline pays the government taxes on that ticket whether you use it or not. Most airlines allow you to apply the full value of the ticket against future flights, usually with a change fee ranging between $50 and $100 per ticket.
The IRS holds that the tax is imposed on the amount paid, not on the actual transportation. That means the government keeps the tax, since the tax is based on a percentage of the amount the customer paid.
Cruises, tour operators, trains and buses
Officially, you are entitled to your taxes and fees back. But how many people know this? Not many.
We contacted a number of cruise lines for their policies and response:
Disney Cruise Lines: If customers cancel the cruise, the amount they paid, minus cancellation fees and other amounts owed, will be refunded. If customers cancel 75 days or earlier before the cruise, they will not incur cancellation fees and will receive a refund; if customers cancel 74-45 days before the cruise, they will lose their deposit. If they cancel within seven days or less, they will receive no refund.
According to Disney, if you cancel the cruise and receive no refund, the taxes and fees are still refunded to customer. When asked to comment on how many taxes and fees were refunded to passengers last year, Disney refused to comment.
Royal Caribbean International: Guests will receive a full refund if they notify Royal Caribbean in writing 70 days (60 days for 3- and 4-night cruise vacations) prior to the departure date. A cancellation charge may apply, depending on when the customer cancels the cruise.
If the customer cancels the cruise, the taxes and fees are refunded. It happens automatically, even if they miss a port of call, whatever that tax was for the port.
Again, when asked how much money was refunded or how many passengers received back those taxes and fees last year, RCCL declined to comment.
Carnival Cruise Lines: Carnival Cruise Lines will not refund “no shows,” unused tickets, lost tickets, interruptions, partially used tickets, or cancellations received late or after the beginning of the cruise. A cancellation occurs when a stateroom is released and not simultaneously rebooked on the same sailing. If customers cancel their cruise 61 days or earlier, they will receive a 100 percent refund. If customers cancel 60 to 30 days before the cruise, they will lose only their deposit. If they cancel within seven days or less, they lose 100 percent of their fare.
Carnival Cruise Lines says they charge fees/taxes levied upon them by the home port and ports of call and a fuel supplement. When a cancellation is made, Carnival will refund taxes, government fees and the fuel supplement.
Again, the cruise line would not comment on how many of their passengers who canceled actually received back those taxes and fees.
Princess Cruise Lines: For most cruises, if customers cancel 75 days or earlier before the cruise, they will not incur cancellation fees and will receive a refund. If customers cancel 74-45 days before the cruise, they will lose their deposit. If they cancel within 14 days or less, they will receive no refund.
According to Princess, "No matter when customers cancel their cruise, they receive the government fees and taxes back."
Really? While the line again would not comment on how many passengers who canceled did, in fact, receive back those fees and taxes, we know for a fact that our 78-year-old woman did not receive them back.
As for tour companies, it actually varies by company. Some, like Abercrombie and Kent, will refund taxes and fees. Others, like Apple Vacations, keep those taxes and fees.
But do the companies tell you ahead of time? And are they ethically or legally required to refund those taxes and fees?
Apple Vacations: It's a nonrefundable policy. If customers cancel the trip, they will not receive any taxes or fees back.
FunJet: No refunds, no taxes or fees returned.
Bottom line: If you have a sizable investment in your travels, you should purchase trip cancellation and interruption insurance. If not, getting any kind of refund, including taxes and fees, can be difficult. But almost everyone we talked with stated that at the very least you deserved your taxes and fees back.
But going back to the cruise example, the words "port fees" have now been altered by many cruise lines in their contracts to make it almost impossible to get those back, even if you never set foot on the ship.
My advice? Buy trip cancellation and interruption insurance.
If you purchase travel services with a credit card (and we strongly suggest you do this) and you don't receive the service for which you contracted, under federal credit laws you can dispute the charge on your bill and the credit card company will investigate and issue a temporary credit while they check into it. If that fails and you are still charged for something you didn't get, you also have recourse in small-claims court.
In addition, as in the case of the woman who missed her cruise and had bought her airline tickets through the cruise line, there's the legal concept of detrimental reliance. She relied on the cruise line to provide all her travel services, to her detriment. The minute she bought everything through the cruise line, the cruise line became, in effect, the agent of the airline as well, and should be responsible. In the case of Princess, it seems they were so obsessed with generating revenue that they forgot some basic responsiblities. And the tag to the piece — the woman will finally be cruising to Alaska this summer, courtesy of the generosity of Washington Post readers. Yes, she'll be buying the trip cancellation and interruption insurance, and, not surprisingly, she won't be cruising on Princess!
In almost every case involving a cruise line, tour or bus operator, demand your taxes and fees back if you cancel, even if the company has a "no refund" policy. You shouldn't be assessed taxes or fees if you never used the service, especially if the fees are paid to a third party based on the policy that you were charged a "head fee' for being somewhere you weren't.
And sometimes, when travel providers fail to disclose additional charges, you also have rights. For example, if you used a credit card overseas between Feb. 1, 1996 and Nov. 8, 2006, you are probably eligible for at least a $25 rebate check from your credit card issuer. Why? A class action suit against Mastercard, Visa, Diners Club and Bank of America (and many other credit cards) charged the companies for not disclosing to their customers a foreign curency transaction fee they charged you for using the cards overseas. The credit card companies settled and established a $336 million settlement fund. Just log on to www.ccfsettlement.com before May 30, and you can file for your settlement online (some settlements may be huge, depending on how many trips you went on and how much money you spent).
Keep in mind that virtually all cruise lines have what amounts to a draconian refund policy and you need to read the fine print carefully. For most cruise lines, if you cancel your trip for any reason within 30 days of the cruise, you are entitled to no refund at all. So if you have any sizable investment in travel, (and a cruise certainly qualifies in this case), you should seriously consider purchasing trip cancellation and interruption insurance. The premiums range from 8 to 13 percent of the cost of the trip, and the difference in premiums is really a reflection of how comprehensive the insurance policy is. Some policies will protect you if you get sick or there are weather issues. Other policies (more expensive, of course) allow you to cancel for any reason.
But if you don't have a substantial investment and don't purchase the insurance, here are some real-world scenarios under which you can —and should — get a refund:
Your flight is canceled by the airline: If your flight is canceled by the airline (and not by you), you are entitled to a full refund, even if the ticket was listed as "nonrefundable." The airline might want to give you the opportunity to rebook your flight later for no additional fee, or they might offer you vouchers to "compensate" you for your inconvenience. But that's not cash back to you, and you are entitled to that refund.
You're offered a voucher: Airlines and cruise lines are notorious for trying to offer vouchers in lieu of refunds. This is problematic on a number of levels. Firstly, a voucher only really works if you're planning on taking a flight, or another cruise, within a year. But the real problem is that it obligates you to take another flight or another cruise and spend even more money. It is not a real refund. If you do accept an offer for a voucher, make sure it has at least a two-year expiration and there are no blackout dates — which could render it valueless in real-world terms.
You didn't get taxes and other fees refunded: Every cruise line insists that even when you cancel your cruise, you are entitled to taxes and fees back. Entitled? Perhaps, but did folks get their taxes and fees back? The woman in Washington, D.C., didn't. If you don't ask — and in many cases, demand — you won't get the taxes back (after all, how can you be taxed on something you never did?). And here's the real confusing part: The fees. After a number of lawsuits against cruise lines for charging port fees but then keeping those fees — even when the ships didn't even stop at those ports — many cruise lines changed the language in their contracts and no longer call them port fees.
One reason they did this: The amount of money represented by just port fees is in the hundreds of millions of dollars. Keep in mind that cruise ships pay port fees on a per-passenger basis, based on the number of heads in beds on each cruise. If you werent on the cruise, the cruise company didn't pay the port fee — but they sure collected it, didn't they? By "bundling" those port fees as part of your overall cruise ship fare, it's now become difficult, if not impossible, to get the cruise lines to break them out and refund them. It's another strong case to buy travel insurance.
You need a refund from your tour operator: They don't bundle the taxes and fees, and as a result, it's easier to go after them for the taxes and fees if you canceled your trip.
The cruise line or tour operator refused a refund: Do you have any legal standing at all? In the case of the Washington woman, the answer is a qualified yes. Since she bought all aspects of her trip — not just the cruise — through the cruise line, a legal argument could easily be made that the cruise line in fact became the agent of the airline (since it also sold her the airline tickets), and the legal argument of "detrimental reliance" can kick in — she relied for her entire trip, including the air portion — on the cruise line, to her detriment. However, most travel providers are counting on the fact that they have deeper pockets than you do, and that most travelers will not litigate.
However, there's a remedy for travelers anyway — small-claims court. In recent years, many states have upped the dollar limits for what can be filed in small-claims courts. In California, it's now $7,500; in Illinois, it's $10,000, and in some states, like Tennessee, it's as high as $15,000. And the good news about small-claims court is that you don't need a lawyer. You can represent yourself — of course, all the basic good judgment and homework principles apply — you need to have all your records, receipts, witnesses and other documentation ready to present to the judge. But the other good news here is that in many cases, the defendants (cruise lines, tour operators) don't appear on their case date, and as a result, the court issues a judgment against them for the amount of your claim. Basically, you get your money back.
Peter Greenberg is TODAY’s Travel editor. His column appears weekly on TODAYshow.com. Visit his Web site at PeterGreenberg.com.
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