The foreclosure crisis isn’t just affecting homeowners. It’s also hitting hotel guests.
Take Steven Gibson, for example. He prepaid $2,541 for five weeks at the Hawaiiana Hotel — a retirement gift for himself and his wife. Then the hotel’s bank foreclosed, the property shut down, and the Hawaiiana took all of the Gibson’s money with it.
Now what?
Well, you ask nicely for a refund, and if they don’t give it to you, dispute the charges on your credit card. As a last resort, you can become a claimant in bankruptcy court.
Which Gibson tried, more or less.
When the Hawaiiana Hotel went belly up last month and we received a letter from them saying, in part, that they “can no longer provide … hotel accommodations and
any and all monies paid for your future accommodations can not be paid back or refunded to you.”
The letter added,
With this said in great sadness, for what it is worth, we thank you all for your loyal patronage and will take our memories of you with us where ever we may go.
With all our love & aloha,
Hawaiiana Hotel Staff
Gibson thought the letter was a joke, so he called the hotel. It wasn’t.
At that point, I contacted US Bank REI Visa, both by phone and by letter, explained the situation and requested a refund, since I had paid with the US Bank Visa card for services which were not delivered.
The bank’s response: Sorry, you are out of luck. No refund.
The bank’s letter to us, dated 11/12/09, said, in part, “In order to preserve your rights under federal regulations, you were to notify us no later than 60 days after the first statement on which the disputed item appeared. As the charge (04/27/09) appeared on your statement date 05/19/2009 and your inquiry was made on 11/11/2009, this exceeds all time limitations as specified. The disputed item will remain on your account, along with any applicable charges or fees.”
Actually, the Fair Credit Billing Act provides that your credit card,
promptly credit or refund overpayments and other amounts owed to your account. This applies to instances where your account is owed more than one dollar. Your account must be credited promptly with the amount owed. If you prefer a refund, it must be sent within seven business days after the creditor receives your written request. The creditor must also make a good faith effort to refund a credit balance that has remained on your account for more than six months.
Maybe the credit card let the Gibsons down.
I decided to do some sleuthing of my own. The Hawaiiana’s Web page led me to the White Sands Hotel. A supervisor at the property insisted that the White Sands had nothing to do with the Hawaiiana — except that all of the staff and managers had been hired at the White Sands after Hawaiiana’s foreclosure.
A supervisor told me the White Sands wouldn’t honor any Hawaiiana reservations, but was offering a “special” rate for former Hawaiiana guests of $40 a night.
I contacted Gibson with this update, and he decided to appeal his credit card dispute. He sent me an update late yesterday:
I just got off the phone with a representative of US Bank Visa and again explained what happened. She found my file (with the letter from the Hawaiiana) and seemed sympathetic. She said she was passing it on to someone else (presumably a manager) for review and said they would get back to me no later than Friday.
I think US Bank can, and should, refund the $2,541. But if it doesn’t, Gibson may become a claimant in bankruptcy court, where he’s likely to recover only pennies on the dollar.
Update (1 p.m.): Problem solved!
Here’s the latest from Gibson:
Received phone call this morning from a representative of US Bank saying we’ll be getting the full amount credited to our account: $469.27 (don’t know how they came up with that amount) from the Hawaiiana’s owners and the balance, $2,072.04, from US Bank REI Visa.
The guy who called was gracious and said the first refund request should never have been rejected. Apparently some sort of mixup. Said he had the file now and the credits should be reflected on our next statement.
I love a happy ending.
(Photo: Simonds/Flickr Creative Commons)
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{ 32 comments… read them below or add one }
In this economy, a hotel asking me to pre-pay would be a huge red-flag, especially if I’m booking more than 60 days out. I would pass on that property. I don’t care what the photos on the web-site look like. That letter from the hotel was totally disgusting. I hope he gets somewhere with his CC. Even if they only refund half his money, he could use that money to book the $40/nt deal at the other hotel and still take his trip. I’d be surprised if he got anything at all from a bankruptcy court.
I hate to ask, but where is the bank going to get the money from to refund him? The hotel obviously took it, and it is likely gone. Should US Bank then pay? How is this their fault?
If you googled “Fair Credit Billing Act”, you would have quickly found, at the very first link (outside of the text of the law itself), the FTC’s website that includes details of the time limitations.
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre16.shtm :
(Note: The FTC considers any dispute to be a “billing error”
“To dispute a billing error on your credit card, you must:
[...]
* Send your letter so that it reaches the credit card issuer within 60 days after the first bill containing the error was mailed to you. ”
A credit card is not a open-ended, time-unlimited protection against default.
All that aside, the offer of $40/nt is not bad…
Let this be a lesson to all: “Friends don’t let friends pre-pay expensive vacations more than 60 days out, unless they have default insurance.”
SirWired
I’ve taken lovely vacations and traveled all over for business as well, and learned to never prepay a hotel more than one night. On more than one occasion, I have arrived at a hotel to find that it was not what was represented or there is some other problem that you find when you arrive–like a hotel in Europe that refused to turn on the heat in winter, or a hotel in the Caribbean that billed itself as being on the beach (even when I asked directly in emails about being on the ocean), but was actually on a muddy inlet that boats use to get to a river–not even on the river! Since I only prepaid one night, in the case of the Caribbean hotel, I was out of there the next day, and with the place in Europe, I didn’t even stay the night–just disputed the one-night charge later for no heat, and I won.
I have to say though, reserving a week or more, and only pre-paying one night is getting near impossible to do. They all insist on prepayment. I am now considering just telling them that I only plan to stay a night or two, and then extending the trip after arriving, but this would be risky in high season.
I would love to hear others’ suggestions as to how to avoid the prepayment trap. Travel insurance isn’t a good bet, since you can rest assured that no travel insurance company will reimburse me just because I have no heat or the location was misrepresented.
It is never, ever a good idea to pre-pay accommodations, particularly more than 30 days out. This should be a good lesson to all out there. Furthermore, I would stay far far away from whatever reincarnation this property becomes under new owners as well as from US Bank. Bad news, unethical operators, poor business all around. Hawaii Convention Bureau has been crying in Travel Weekly and other journals about how business is down…serves them right with shady hoteliers demanding pre-payments and shafting customers, and the shrugging shoulders of other local hotels…they are apparently half empty island-wide, they could have stepped in to the breach and charged a token $20 for their direct costs of servicing the room, and maintaining the “aloha” spirit of the islands. Instead, they are giving these travelers the proverbial Bronx Cheer, to which I give the Hawaiians my Quebec Salute.
@SirWired the bank could have cited any of the other provisions of the FCBA, which I’m very familiar with. For example, there’s a 100-mile limit that it can invoke. The 60-day rule may or may not apply to their situation, depending on which side of the argument you’re on.
Still, there’s no doubt that the bank let its customers down. You pay by credit card in order to be protected, and despite the law, you would expect your credit card to go to bat for you. Theirs didn’t. That was my point.
@SirWired, “the $40/nt is not bad.” WHAT? If you’re just now booking your trip, you’re right, $40/nt is “not bad,” but these people have already paid more than $2,500, and now they’re expected to pay an additional $1,400 so they don’t miss the 5-week vacation they’ve probably been looking forward to for years….? That’s terrible and unreasonable–and bad customer service on the part of his bank and the hotel who took over the property. If I were Mr. Gibson, I’d find another hotel and another credit card company.
@Patricia, “travel insurance isn’t a good bet.” If you just don’t like your hotel, it won’t help, but some policies are available that do cover “financial default” of a supplier, which should have resulted in Mr. Gibson’s refund. I’ve had more than a few people who have had to use their travel insurance–a couple of articles were written about one who said, “Our attitude has always been…if you can’t afford the trip insurance, you cannot afford the trip.” Just like car or homeowner’s insurance–you may never need it, but what if you do?
Some of the people who make blanket statements about not prepaying more than one night’s accommodation should be aware that many ski resorts/hotels require full prepayment for all booked nights, particularly if reservation is made less than 30 days to 2 weeks in advance, depending on the property.
Is that the Kuuali Fishpond?
@ Bill: Why should Chris worry more about the bank that the customer?
What underlying here is a fundamental problem with pre-paying. You turn from a potential client to a liability. That never improved customer service.
The charge wasn’t an error until the company reneged on their end of the agreement.
All they needed to do is go through a good travel agent and there
reservations would have been resolved and moved to a similar
hotel…be wise use a travel agent
@Christopher Elliott From your article, that passage from the FCBA does not apply here. All it’s saying is that if you have a credit balance on your credit card, your credit card issuer has to pay it to you, upon request.
Also, I wasn’t aware that “going to bat for the card member” was one of the services that credit card issuers provide. Could you please show me an advertisement, piece of literature, section from a card member agreement, or anything else that would tell me that “going to bat for the card member” is a service offered by any credit card issuer?
@Roberto, my interpretation of the FCBA was based on a conversation I had with a hotel manager, in which she pointed to this passage, and suggested that it meant customers might have more than the standard 60 days to dispute an erroneous charge.
I can see how you would interpret it the way you have.
But regarding your second argument — are you kidding me? I don’t know of a credit card that doesn’t promise some kind of enhanced buyer protection to the customer. It is incumbent on these cards to do more than just follow the law. They have to protect their customers.
@Michelle:
Travel insurance may help you if the hotel defaults, but I wasn’t writing about that. What I was writing about is the fundamental problem with prepaying, and the fact that travel insurance will not cover you if, for example, there is no heat in winter.
@Linda Kundell
Yes, indeed I am aware that many places require full prepayment, and I was writing specifically about the problem with that and asking if anyone has suggestions as to how to get around it besides only booking the first night, which risks that there may not be room for additional nights in high season.
Bottom line is, default is not your average problem. Being required to pay ahead is a very common problem. I might remind you both that the OP wouldn’t have lost all his money in the foreclosure if he had not been required to prepay.
Most credit card processors require that a company that processes a large amount of credit cards either maintain funds on deposit (called a hold back) or maintain a letter of credit for just this situation so the credit card company does have a place to go get the funds. If their processor (third party company) failed to require this, then they are on the hook for the funds.
This is a pure failure to deliver purchased items case. Unfortunately, if the end up in bankruptcy court, I’m pretty sure they would fall in to the “unsecured debtor” pool and would be out of money. Suing doesn’t help either.
Wow that is great news.It is nice to see a happy resolution especially at holiday time.
Guys – when did the ‘billing error’ occur? It did not occur in April or May, it occured in November when the hotel anticipatorily repudiated the reservation agreement. The first bill which failed to contain a credit from the hotel would have happened in November, 2009 – not May. Thus – the billing error occured in Nov 2009 – which is why the bank gave the credit.
Next – yes – the 100 mile limit applies to goods purchased.
Finally – yes – Visa/MC had a holdback from the hotel – and thats being held pending bankruptcy court release.
it’s unfortunate, in the islands right now, that many of our hotels and resorts have gone into bankruptcy and foreclosure. usually the process is that a property remains open (or closes very briefly–for a week or so) until it goes to auction, a buyer bids, and within a certain number of days ownership is transferred–no interruption of operations. however, the process that the hawaiiana took is troubling, as most of our economy on the islands depends upon tourism. if someone on the mainland thinks they’re hotel is going to close, and airfare tends to be hit or miss, how are we going to get travelers here at all? we can’t ALL live on the beach.
Question…is the Hawaiiana now the White Sands? I looked at the website, it almost looks like it from the web address.
@Joe Farrell – you said what I was going to say: that the dispute should not have been rejected due to the fact that the customer paid the amount in April/May. As you point out, the discrepancy occurred at the time it was revealed by the merchant that they were not going to provide the services for which the customer had paid. This was a standard failure-to-deliver case, and never should have been rejected by the bank.
Fortunately, it appears somebody with a brain got ahold of this case and did the right thing. Yay! And I have to say that it’s refreshing to see that this was a case in which the company (US Bank) did the right thing WITHOUT having to be prodded by our favorite Travel Troublshooter.
@Roberto – I’ve got to echo Christopher here…HUH? You don’t think that your credit card company should go to bat for you if you get ripped off by a merchant? Shopping protection and dispute resolution are among the key benefits that most credit card companies advertise. It’s one the main reasons I use credit cards for certain purchases – especially travel-related ones, or anything that I pay for in advance of receiving the goods/services. I pay with a CC because I know that if I don’t actually receive the goods/service, my CC company won’t make me pay for it.
Without that benefit, credit cards are of little use to me, because I don’t carry a balance.
@Christopher Elliott I just looked at the American Express website and the Capital One website, and I didn’t note any card member benefits that looked like the card issuer would cover my loss if I were to prepay for a hotel stay, and the hotel were to subsequently file for bankruptcy.
Could you please help me out and point me in the direction of such a claim? For the record, I’m pretty sure you’re mistaken.
@Techstar – No, the White Sands is not the same place as the Hawaiiana. It is several blocks away, but it is another low-rise old style hotel with kitchenettes and some l bedroom units. Many are owned as timeshares. It is old but clean and friendly and old school compared to the fancy high rises in Waikiki. We stayed there last winter.
@Patricia, I understood your point, and acknowledged that travel insurance wouldn’t cover if you just didn’t like your hotel. That may be for legitimate or illegitimate reasons, but “I don’t like it” isn’t a reason for reimbursement. My point was that your overreaching statement of “travel insurance isn’t a good bet,” isn’t accurate in the case of Mr. Gibson outlined in the article we’re all commenting on. I will, however, say that some insurance companies have services that will help you find something else if it’s needed. I can’t determine from the fine print whether or not they’ll help you get your money back from a bad experience, but they will help you rectify it and find someplace new. As you pointed out, your credit card company should help get the money back from a defective property.
Here’s my suggestion for avoiding pre-payment: don’t patronize a property that requires you to prepay. If I have no choice but go to a property where I have to prepay, I do so through an agency or a tour company.
@Roberto, respectfully — virtually all forms of payment offer some assurance that you’ll be protected, both explicitly and implicitly. A hotel booking isn’t specifically addressed, nor would anyone expect it to be. But credit cards do promise that they’ll protect consumers when they deal with merchants that don’t deliver as promised, through dispute departments and extended warranties.
@Christopher Elliott Respectfully, if it’s so ubiquitous, I’m a little surprised you were unable to locate a credit card that promises to go beyond what is required by the FCBA against a bankrupt merchant.
I’m not an attorney, but I’m pretty sure a CC issuer doing a chargeback against corporation in bankruptcy protection would be in violation of federal bankruptcy code, anyway. This is why you might find that banks are reluctant to do it.
@Roberto, thanks for the thoughtful comments. I’m pleased (and I’m sure you are, too) that Gibson’s bank found a way to refund his money, federal bankruptcy code notwithstanding. There are other issues, such as the credit card merchant agreement, that come into play. But the important thing is, this was fixed.
@Christopher Elliott Well, I’m definitely glad that Gibson didn’t suffer a monetary loss due to the hotel’s bankruptcy.
@Roberto, the bank isn’t doing anything contrary to the bankruptcy code, their chargeback isn’t going to take precedence or get them money illegally; it just makes them a creditor in the eventual pennies-on-the-dollar resolution — instead of the customer, which is a major reason to make purchases like this by credit card (and why we pay for it, not only annual/finance fees, but in the percentage that they take from every transaction). Yes, there are limits on what they’re *required* to treat this way, partially to avoid fraud the other way, but most good cards will cover legitimate losses in reasonable circumstances. For instance, in almost all airline bankruptcies, credit card customers were refunded the full amount by their bank (which doesn’t always make you whole, as last minute replacement tickets are more. Travel insurance might or might not cover that additional cost).
The way I understand the “holdback” is that it’s kind of like a rolling escrow account, and the bank would be able to keep that (over all other creditors) provided the debts to the bank after refunding customers exceeded the amount held. But I’m sure that’s a messy detail for the bankruptcy lawyers to resolve — all the more reason to let that be an issue between large corporations and not something each customer has to manage…
@Roberto – I just did a quick check on the American Express site, and it took me less than a minute to find this:
“Cardmember Benefits – Resolve Disputes with Merchants”
Clearly that means they will…um…”resolve disputes with merchants.” And paying money for a product or service that the merchant subsequently tells you they are not going to be delivering would obviously fall into the category of a dispute with a merchant, would it not?
Oh, and I just checked Capitol One, and here’s what I found there:
“DISPUTE A MERCHANT CHARGE:
Unable to resolve it with the merchant? There are many dispute situations, here are some typical situations where we can help you dispute a charge:
- You didn’t receive merchandise or services you paid for
- You didn’t receive a cash advance that went through at an ATM
- You canceled a service and you’re still being charged
- A credit you were supposed to receive didn’t show up on your statement
- The amount is wrong or you were charged for the same transaction twice”
As you can see, disputing a charge with a merchant IS part of cardholder benefits. In fact, not receiving the merchandise or services you paid for is listed as the number one type of situation Capitol One can help you with!
In any case, I can assure you there are numerous frequent readers of this forum who can tell of the many times we have disputed charges from merchants…sometimes successfully, other times not. But the fact remains that credit card companies DO offer merchant dispute resolution as a cardholder benefit. Do they come right out and mention every single situation that might result in a dispute? Of course not! They wouldn’t mention non-delivery of a pre-paid hotel anymore than they would mention ordering a diamond watch online, and not receiving it from the merchant. It’s just one example of the bazillions of merchant disputes that might come up in one’s lifetime.
@Josh: You’re basically correct on the concept of holdbacks. In general, the purpose of a holdback is to protect the credit card processing company when it handles the charges for a merchant. If Big Hotel contracts with MegaBank to process its credit card charges, then every time a customer pays for a hotel room at Big Hotel, MegaBank takes care of charging the customer’s credit card and transferring the money, less fees, to the bank account of Big Hotel.
However, MegaBank knows that at least some of Big Hotel’s customers may dispute their charges and win; or Big Hotel may take prepayments for rooms or deposits and then not be in a position to honor those reservations (as in the case of this bankruptcy). So MegaBank institutes a holdback, which may be in the form of an additional percentage of each transaction up to a maximum of $X hundred or thousand dollars; it may be the first $Y thousand dollars charged. The amount is theoretically negotiable in the same way a mortgage is negotiable; that is, you can ask for a different rate but don’t hold your breath. MegaBank will periodically review Big Hotel’s finances and increase or decrease the holdback amount as it evaluates the risk.
Legally, that money “belongs” to Bighotel, and is thus an asset in bankruptcy. However, it also serves as a kind of collateral, and thus it doesn’t get lumped in with all the other cash assets that BigHotel might have. The holdback money would be used strictly to pay credit card claims for rooms/services not delivered – credit card disputes – and any money left over would go to the Bankruptcy Court to dispose of as any other asset. If there isn’t enough to pay off the credits, then the credit card companies and the Megabanks of the world eat the excess cost – unless, of course, they themselves have reinsured themselves for this kind of situation
I heard this on a talk show but am not sure whether it only applies to some states or is passe’:
“When no goods or services are rendered in response to payment, then the credit card company is subject to refunding the money to the ccardholder/purchaser regardless of time elapsed since biling or purchase or how far away the merchant was. The idea was, whoever takes the customer’s moeny has some responsibility in the matter.”
So in this case it could be the credit card company and not Mr. Gibson who stands in line as a creditor of the bankrupt h otel.
Oohh… I’m late back to the party.
Firstly,
The 100-mile limitation does not apply if you made the purchase from your home. The limit applies to your location at the time of the purchase, not the location of the merchant. So, the 100-mile rule would not have applied here.
I think this limitation is similar to common limitations on out-of-town checks. Figuring out who is right is (and collecting from the customer) is a lot harder when the customer is on the other side of the country. I can conceive of situations where a merchant loses a dispute, but is in fact in the right. Collecting from out-of-state defendants is very difficult/expensive.
That said, it is true that few issuing banks enforce that rule, at least not for small-ish claims; they might be a bit more strict if you bought a car on your credit card while on vacation across the country. And if you claim you didn’t make the purchase at all, well, the 100-mile rule doesn’t apply there either.
As far as the 60-day limit in particular goes. I suspect whether or not you are going to get a refund depends on several factors:
1) Most important: the likelyhood the bank thinks they will be able to recover their money. This depends on the merchant’s contract with their bank, and is out of the issuing bank’s control.
2) Your profitibility to the issuing bank.
3) The nature of the complaint. (A dissatisfaction complaint six months later is going right in the circular file. A default complaint could have longer life.)
I, personally, have gotten a refund for a pre-paid vacation from a credit card bank (Chase) more than 60 days after purchase, and it certainly never hurts to try. (This happened to be the Windjammer Barefoot Cruises BK.) However, I fully expected to be rejected, and would have not have been upset in the least if they had refused the refund. (Many victims of that particular BK were refused.) There are clearly disclosed time limits, and I have no reason to be upset if the bank follows them. Also of note in my case is that I had travel insurance with default protection as a backstop; indeed the only reason I even filed the claim with the bank was because of TravelGuard’s insistence that I do so.