After Winning Credit Card Disputes, Passengers Are Getting Bills From One Airline’s Trustee

After German oneworld airline air berlin went bankrupt travelers didn’t just lose their flights and their miles – the topbonus program was a separate company, but it went bust because most of its assets were receivables from the airline, which didn’t pay for the miles it had issued for flights – they also lost a lot of money.

The advice when an airline goes bankrupt is to get your money back for future tickets from your credit card company. If a business doesn’t provide the services you paid for, your credit card company will get you your money back (usually). Credit card companies don’t give businesses all of their money from sales right away, there’s usually a ‘hold back’ – at least unless the business meets certain conditions, for instance an airline might get its money right away provided it has minimum cash balances in the billions.

German law has an interesting quirk though. Apparently people who pay for services they haven’t received are considered unsecured creditors in bankruptcy, and getting your money back via a credit card chargeback is considered ‘queue jumping’. That’s why there are reports in German media that the airline’s bankruptcy administrator is sending bills to people who bought air berlin tickets, and then got refunds from their credit card company when the airline went under. (HT: Loyalty Lobby)

Reportedly 679 bills were sent out to passengers who had partially flown their tickets prior to filing the charge back. If a customer had flown one way, got stranded, and had to buy a new ticket home then a(t least a partial) charge back seems appropriate to me though perhaps the credit card company refunded the full ticket price and that wasn’t appropriate. In total roughly 10,000 chargebacks were filed against the airline.

I first wrote about this issue 18 months ago when an American received one of these bills.

Most consumers assume that successfully disputing a credit card charge nullifies a debt. That’s not true – the company you paid can still ask for payment and sue you for the debt.

However in this case air berlin doesn’t have a claim that the customer failed to pay for something they received — air berlin cancelled the flight. The claim is that even though they didn’t provide the service, the limited funds the airline had should have gone to repay someone else.

That may or may not be the case under German law but as a US resident I simply wouldn’t worry too much over it. Ultiamtely the chargeback was done in compliance with the airline’s credit card processing agreements covering events including bankruptcy.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. This same outcome could occur in an American bankruptcy and does on occasion; however, in a business bankruptcy, the limits on what the trustee can pursue are over $6,000 per entity, so this would rarely apply to airline ticket refunds. If someone was refunded $500, the trustee would not be able to pursue that “preferential transfer.” I tried to use laymen terms, so most folks could understand.

  2. I would ignore the bill. Let the trustee try to file small claims against hundreds of customers. Good luck with that strategy. Nice to know that German law (like US law) protects secured institutional creditors at expense of the individual.

  3. If they cancelled the flight before filing for bankruptcy, the trustee has no legitimate recourse. On the hand, if the cancellation occurred after the bankruptcy was filed, the trustee is within their rights to demand repayment, though I have my doubts as to how far this will go. Frankly, if I were the trustee, I’d try to get payment from the credit card companies for all the repayments, then let the credit card company sort it out. If nothing else, this is going to be interesting.

  4. Even under American law, people who pay for services they didn’t receive are unsecured creditors. However, when the credit card company reimburses you via charge-back, they get your claim against the bankrupt company. I’m not fully understanding why under German law the customer would be held liable to pay the bankruptcy estate funds the credit card company paid the customer under the charge-back provisions of the credit card agreement. I assume they consider the hold-back as a potential asset that improperly evaporates once charge-backs are settled? In any event, best of luck to a German bankruptcy trustee trying to collect from US customers. They’d have better luck going after AirBerlin’s credit card processor for the hold-back.

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