After Snafu, ARC Serves Agents with a Fee Increase

On the heels of its settlement snafu last week, ARC has announced a back to the future increase in quarterly transaction fees to 2008’s level.

ARC announced that its per-transaction fee for 2010 will increase from $.019 (1-9/10ths of a cent) to $.020 (2 cents) per transaction. The transaction maximum will increase from 1.875 million to 2 million. There will be no change to the 1,000 transaction minimum. The new fee will be effective beginning with the first quarter of 2010, which will be billed on or after April 22.

ARC’s director of strategic communications Allan Muten told Travel Market Report that the quarterly transaction fee is returning to its level in 2008. He said that ARC worked to keep its fees level despite the decline in transaction volume because of the economy’s effect on agencies.

However, an agency executive said that while the increase might amount to about $10 a year for the average agency doing 10,000 transactions a year, the point is, What is ARC doing to be more efficient and why should travel agencies underwrite the airlines’ accounting system?

“In case they haven’t realized it, airfares, salaries and the entire economy in general has not grown or gotten a raise. Why does ARC? It’s not the amount, but rather it’s the fact that ARC has a monopoly. Is there anyone else that can fill the void? What about a BSP from another country?”

Unraveling a Snafu

The move comes after ARC’s erroneous early withdrawing of funds from agencies’ bank accounts.

Indeed, ARC announced that its settlement for sales for the period ending on Jan. 10 that was scheduled to be drawn or credited from agent bank accounts on Jan. 20 was erroneously settled against a number of agent bank accounts in error on either Jan. 14 or Jan. 15. ARC said that it has reversed all affected transactions in order to rectify the error.

It also asked that agents contact their banking institution to ask that they not individually return credits or drafts in order to make the overall uniform reversal process run much smoother for all parties.

“We accept full responsibility for this occurrence and apologize for any inconvenience this has caused our agency community. ARC will reimburse travel agencies for any related charges incurred as a result of our error as we work to rectify the issue,” said David Collins, ARC’s president and chief executive officer.

Muten said that ARC was widely praised for its handling of the issue.

In a follow-up announcement, ARC stated that the erroneous debit/credit was issued on behalf of ARC by Bank of America on Jan. 15 and that it had confirmed that its reversals have begun to reach agents’ bank accounts. ARC recommended that agents follow up with their bank if they have concerns about the timing and availability of funds.

ARC said that it will reimburse agents for any related charges incurred as a result of its error. Agents are asked to do one of the following items in order to initiate these requests: mail a letter requesting the refund along with supporting documentation to ARC, Attn: Agent Draft Refund, 4100 N. Fairfax St., Ste. 600, Arlington VA 22203-1629, or e-mail supporting documentation to agentdraftrefund@arccorp.com.

Travel agents are asked to contact ARC Customer Care Center at (703) 816-8003 or through e-mail at ccchelp@arccorp.com with any related questions. Further details regarding reimbursement procedures will follow shortly.

ARC Responds

The timing of the release of the 2010 fee schedule and the systems error was unfortunate. First, we want to reiterate that ARC takes full responsibility for the premature settlement error, which occurred earlier this month. We truly regret this incident, which tarnished our four-decade-long record of financial management and have reached out to those partners that were affected and have agreed to reimburse any resulting costs.

As for the release of the 2010 fee schedule, ARC made a decision not to delay the messaging, but continued with our communication plan and announcements that had commenced in December. We agree that timing was not good from a corporate image standing, but delaying the information to “save face” would be a further disservice.

The determination of ARC’s annual fees is a months-long effort done in consultation with advisory groups comprised of all ARC’s customer groups. All involved, agents and carriers alike, understood the importance of keeping the coming year’s fees from rising significantly as one might expect in light of the recent slumping industry performance and declining numbers.

Indeed, we felt that keeping the annual fee within $15 of the year before and letting the transaction fee adjust by just 1/10¢ (but no higher than it had been before it when down by the same amount a year ago) meant that we were quite successful in keeping fees in check.

It may be worth noting that transaction fees are billed only to agencies submitting 1,000 or more transactions per quarter and most agencies do not have any transaction fees at all. Of the 1,200-plus agencies that are subject to quarterly transactions fees, 73% will be paying less than $100 and the 1/10¢ per transaction increase amounts to between $1 to $5 to these agents.