Decision No. 23-C-A-2023

[1] In Decision 98-C-A-2022 (Joel Goldberg and Louise Déry-Goldberg v Air Canada), the Canadian Transportation Agency (Agency) was of the preliminary view that Exception 2 of Rule 100(C) of Air Canada’s Tariff is unjust and unreasonable because it is more restrictive than the refund obligations set out under subsection 17(7) of the Air Passenger Protection Regulations (APPR). The Agency found that it provides no alternative refund options to passengers whose credit card account is closed and creates a disadvantage to passengers who purchase their tickets by credit card, as these passengers may face hurdles in their pursuit to recover their refunds.

[2] The Agency provided Air Canada with the opportunity to show cause why the Agency should not make an order to disallow Exception 2 of Rule 100(C) of its Tariff.

Preliminary Matters

Submission by the applicants

[3] The applicants in this case responded to Air Canada’s response to the show cause direction. They filed a submission regarding the unreasonableness of Exception 2 of Rule 100(C) and argued why a refund should be ordered, although the Agency previously dismissed their application.

[4] The applicants did not make a request to file their submission in accordance with the Dispute Adjudication Rules. However, the Agency finds that part of their submission may be relevant to its determination of whether Exception 2 of Rule 100(C) is reasonable within the meaning of the Air Transportation Regulations (ATR).

[5] Accordingly, the Agency exercises its discretion under the Dispute Adjudication Rules to place the applicants’ submission on the record of these proceedings. However, the Agency will only consider their arguments relating to the reasonableness of Air Canada’s Tariff because it has already dismissed their application.

Repeal of subsection 17(7) of the APPR

[6] On September 8, 2022, new amendments to the APPR came into force regarding additional refund requirements. This change has resulted in subsection 17(7) being removed and replaced with subsection 18.2(1), which provides that all refunds provided under the APPR must be paid to the person who purchased the ticket using the method used for the original payment, unless the person agrees to a refund in another form under specific conditions. Given that the method used for refunds is still addressed under the APPR in an equivalent provision, the repeal of subsection 17(7) does not affect the Agency’s preliminary view in this case.

Direction to Show Cause

Position of the parties

Air Canada

[7] Air Canada submits that the Agency inaccurately distinguishes between “original form of payment” and “account”. It argues that the APPR does not “carve-out” requirements for carriers to issue refunds to an account other than that used in the original form of payment. It also submits that Rule 100(C) reflects the terms and conditions of its commercial agreements with credit card companies and that the Agency does not have jurisdiction over these contractual arrangements.

[8] Air Canada disagrees with the Agency’s statement that passengers who purchase tickets with credit cards are at a disadvantage in comparison to other passengers. It argues that this statement is based only on this case, which is not indicative of a systemic issue. It also argues that, subject to applicable exceptions, credit card refunds should always be made to the same card account that was used for the original transaction.

[9] Air Canada submits that a requirement to provide a refund to an account other than that used in the original form of payment could create potential violations of Air Canada’s agreements with credit card networks and expose it to fraud. It argues that imposing such requirements should be made through regulations, with the proper powers delegated from Parliament, in order to maintain an even playing field for all carriers.

Applicants

[10] The applicants argue that the language of Exception 2 of Rule 100(C) is clear that it does not apply to closed accounts and that Air Canada should not rely on this exception in such cases.

[11] They submit that, contrary to Air Canada’s arguments, the evidence that Air Canada provided indicates that major credit card networks, payment processors and merchants permit alternative refund methods if a refund is not possible to the original form of payment or if there is a declined response.

Analysis and determination

[12] The Agency has authority over carriers’ tariffs by virtue of the ATR, which require carriers to clearly outline their policies with respect to the terms and conditions of carriage in their tariffs. The ATR also specifically provide that a tariff must include a refund provision for services purchased but not used. Air Canada’s Tariff incorporates the APPR, which prescribes specific refund obligations for carriers. In this case, Air Canada’s credit card refund policy is expressly stated in the Tariff. Therefore, the Agency has the authority to make determinations regarding the reasonableness of its Tariff provisions pertaining to credit card refunds.

[13] The Agency finds that Air Canada has not demonstrated that its Tariff is just and reasonable. The Agency finds that Rule 100(C) does not provide the person who purchased the ticket with a reasonable alternative to obtain a refund in situations where the original credit card account used to purchase the ticket has been closed. It is unreasonable not to provide alternative options for a monetary refund to the person who purchased the ticket in situations where their credit card account has been closed.

[14] Air Canada is obliged under subsection 18.2(1) of the APPR to provide a monetary refund to the person who purchased the ticket. The refund must be processed using the method used for the original payment — for example by debit card, credit card or cash — unless that person agrees to a refund in another form that does not expire, and confirms in writing that they have been informed of their right to receive the refund by the method used for the original payment.

[15] Remitting funds to the original account can be a way for carriers to comply with subsection 18.2(1) of the APPR and to confirm that a refund is actually made to the person who purchased the ticket. However, there is no provision in the APPR that allows a carrier to restrict all credit card refunds specifically to the account used in the initial transaction, especially if it has been informed that the account has been closed.

[16] Furthermore, the evidence provided by Air Canada does not support its argument that it would be commercially disadvantaged if it had to provide a refund via an alternative method in situations where the credit card account used to purchase the ticket has been closed. The evidence submitted demonstrates that major credit card networks, payment processors and merchants provide refunds through alternative means if they are unable to return the funds to the original credit card account used to make the purchase.

[17] In light of the above, the Agency finds that Rule 100(C) does not strike a balance between the passengers’ rights to be subject to reasonable terms and conditions of carriage and Air Canada’s statutory, commercial and operational obligations, as it provides no alternative refund options in situations where the original credit card account used to buy the ticket has been closed. Accordingly, the Agency finds that Rule 100(C) of the Tariff is unreasonable.

Order

[18] The Agency orders Air Canada to amend Rule 100(C) of its Tariff to provide a person who purchased a ticket with alternative options for a monetary refund if the carrier is informed that the original credit card account used for the purchase has been closed.

[19] Air Canada is to file its revised Tariff Rule with the Agency, as soon as possible and no later than April 21, 2023.