South American airline LATAM faces a $1 million fine from the US Department of Transportation for failure to refund passengers in a timeline manner after cancelling flights during the early days of the COVID-19 pandemic. The penalty comes on the heels of more than 750 complaints by consumers to the Agency regarding slow and onerous processes to get their money back.
LATAM’s refund process, like that of most other airlines, was overwhelmed in early 2020. As part of its procedures, it required all refunds to first be issued as a credit voucher. Those could be converted to cash via bank transfer (rather than credit card refund). The DOT notes “consumers had to go through extra steps and wait additional time to get the refund to which they were entitled.” In many cases the full refund process took more than 100 days. The DOT describes this as “significant harm from the extreme delay in receiving their refunds.”
For its part, the carrier notes it was dealing with Chapter 11 bankruptcy proceedings while also cancelling 1,100 flights daily. The carrier also points out it did not receive bailout money from any governments, unlike the US carriers. And the company has refunded more than $62 million to date.
The two step process was implemented to ensure customers did not issue a chargeback on a credit card and also get paid back directly, the company claims. And LATAM invested $2 million to update its website to process more refunds automatically.
The DOT, however, does not see any of that as sufficient to justify the harm caused to travelers.
Also notable in this ruling, the full penalty amount must be paid. In many cases 50% of a DOT fine is suspended when issued, eventually forgiven should the airline go a couple years without repeating the offending behavior. As with the Air Canada penalty for similar refund shenanigans, however, this penalty must be paid in full over the next 150 days.
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