Summary

In March 2017, the European Commission issued a non-legally binding information noticeInformation notice on relevant EU consumer protection, marketing and data protection law applicable to claim agencies’ activities in relation to Regulation 261/2004 on air passenger rights, European Commission, 09 March 2017. to provide passengers with background legal information regarding the activities of claim agencies in the field of air passenger rights.

This initiative welcomed and supported by the sector, responded to recognised consumer protection problems. Twelve months following the publication of the guidelines, A4E believes the recommendations detailed in the information notice have not had a positive effect, and that the practices of claim agencies in the field of air passenger rights are deteriorating, increasingly damaging the relationship between airlines and their passengers.

This document reviews current practices against the objectives set out by the European Commission.

Introduction

A4E supports the review of Regulation 261/2004 on Air Passenger Rights to make the rules fairer, clearer, and easier to apply. This review of the regulation is extremely important in terms of legal certainty and to put an end to numerous Court rulings across the EU, with judges interpreting the Regulation in various and often exceedingly different ways.

An unintended consequence of Regulation 261/2004 has been the emergence and growth of an industry of “EU261 claims management companies” seeking to profit from the EU 261 claims process. These third parties are often unregulated, or minimally regulated, and employ aggressive marketing techniques. They damage the relationship between airlines and their passengers by misrepresenting the airline claims procedures as being onerous and stressful, in effect reducing the amount of compensation the passenger receives by deducting the compensation that would otherwise have been payable to the passenger.

The Guidelines on Regulation EU261 or prescribed by applicable law (whichever is the lesser) to respond directly to passengers before engaging third parties to claim on their behalf. This would not restrict passengers from consulting legal or other third-party advisers before submitting their claim directly to the airlines. 

In addition, A4E strongly supports the dispute resolution mechanisms established in the EU under the ADR Directive and is concerned that the practices of these third parties hinder the spirit of such mechanisms. 

Finally, in light of the increasing divergence of rules between Member States, a time limit of two (2) years for bringing actions for compensation for flight cancellation should be determined by the Regulation. This is consistent with the Montreal Convention and would avoid confusion for EU passengers. 

Alternative Dispute Resolution (ADR)

The March 2017 Information Notice states that “Passengers should always seek to contact the operating carrier before considering other means to seek redress for their rights. Passengers are reminded that under Article 16 of the Regulation, the national enforcement bodies are responsible as public authorities for enforcing overall compliance with the Regulation, and that “Alternative Dispute Resolution” procedures (ADRs) may also contribute to achieving a mutually satisfactory solution to disputes between passengers and operating air carriers at a private law level. Both types of procedures are embodied in current EU legislation and can be used by passengers to make sure that their rights are respected and that they receive the compensation they are entitled to”.Idem, page 1, § 3.

A4E members operating in the UK, however, witness that the current provider UK ADRs are under persistent pressure from the CAA, their regulating body, to accept claims brought by Claims Management

Companies (CMCs) at the ADR level. Similarly, the German ADR (SOEP) is under pressure from the German Ministry of Justice to accept claims from CMCs at the ADR level. Such developments go against the recommendations of the European Commission’s Information Notice to offer a free and independent alternative resolution service to EU consumers.

Price Information

The Information Notice clarifies that claims agencies must clearly display the price of their services, i.e. showing an initial price on their website which includes all applicable fees:

In practice, carriers’ experience shows that the price of the service is not clearly advertised (if advertised at all) — as supported by the following examples:

• “Claim a compensation of up to € 600 per passenger”: Such a statement misleads the passenger since, in practice, passengers will never receive the full €600 due to a deduction of the claims agency’s fees. For this reason, an advertisement stating “Claim up to €600” is deceptive. Information announcing “up to €600” is similarly misleading because the €600 compensation only applies for flights over 3500 km
• Hidden charges are commonly reported (for example administrative fees or bank transfer fees)
• The risk of additional charges is not mentioned, which also applies when cases escalate to court and legal fees are involved
• The compensation process is not clearly explained to consumers, rather more generic expressions in English such as “fast cash”, “fast deal”, “no win, no fee”, and “no cure, no fee” are used
• Moreover, at no time do claims agencies inform passengers, either in their communications or even in their Terms and Conditions, of the risk for the passenger of being sentenced by the courts if the legal action brought by the claims agencies is deemed groundless or inadmissible
• In certain jurisdictions (Italy, France), if moral damages or costs are awarded to consumers, it is not clear who will get the money at the end and how the financial compensation will be shared
• Misleading statements from CMCs such as “the cheapest on the market”, and “the cheapest solicitors” are frequently observed.
• Agencies provide passengers with false information about the compensation amount received by the airlines to reduce the amount eventually given to the passenger.

Power of Attorney

The information notice insists that claims agencies must be able to produce a clear power of attorney. However, several cases experienced by airlines show that:

• There is no power of attorney provided or agencies refuse to provide the officially verified powers of attorney
• The power of attorney is not clear and rather confusing
• The power of attorney is not signed
• Confusion remains as to whether the document is a notice of transfer or power of attorney
• Issues arise with the same passenger having multiple legal representatives for the same compensation claim
• The passenger is not aware that there is a legal representative or that a court case is taking place on its behalf
• Several CMCs fail to provide booking references, causing a prolonged handling time and increasing the risk of escalation of the case to court in case the 14 days deadline is not met
• Most of the time, carriers approached by CMCs do not receive a valid identification document from the passengers, preventing airlines from assessing the validity of the claim

Telemarketing

The March 2017 notice states that claims agencies should not resort to persistent unsolicited telemarketing. However, the past months have seen:

• Persistent advertisement on TV, radio, social media, and newspapers (canvassing). Passengers have notably shared experiences of having been contacted by the CMC by phone, threatening to impose a fee in case of withdrawal of the claimExamples of practices from agencies such as GTassistant, (website www.kompenzaceletu.eu) or Longevity Databank (website www.travelclaim.cz) approaching passengers at terminals, in parking, using commercial practices prohibited by the airports as an unauthorized commercial activity, have notably been reported.
• Unsolicited marketing with cookies used on the Internet
• Aggressive and misleading marketing through social media/TV/Radio/Newspapers
• Cases were also reported of passengers being approached by agencies by phone, pretending to call on behalf of the carriers to help with the procedures related to claims and asking for personal information

In addition, the overall impression is that increasing information on EU261 should not be confused with increasing commercial marketing from CMCs

Personal Data

On the issue of the transmission of personal data also touched upon by the information notice, carriers have observed:

• Concrete examples where CMCs did not comply with data protection laws and disclosed personal and confidential consumer data
• An increasing number of commercial partnerships between CMCs and travel agencies or travel services (for example “packages” that include parking + claims handling)Practices put in place by agencies such as Gopogo (website www.gopogo.co), Flybillet.dk’s collaboration with AirHelp (website here) or, in Germany, online platform OPODO’s collaboration with FAIRPLANE (otherwise known as Heinke . Skribe + Partner Rechtsanwälte GmbH) are particularly telling

Conclusion

Amid the spirit and objectives followed by the European Commission’s Information notice, it appears clear to airline carriers that the guidelines have not fulfilled their objectives. They are not legally binding for courts, and their content has not facilitated a decrease in damaging practices.

Not being regulated, “Claims Management Companies” in Europe are currently a fast-growing business throughout different jurisdictions, and even the smallest ones in Europe have adopted aggressive commercial strategies.

Considering Claims Management Companies’ disregard of the guidelines, A4E carriers are aware that legal proceedings have already been issued against them in different jurisdictions (Including in the UK, France and Sweden). For this reason, A4E is calling for swift action to minimize the damage claim agencies’ activities are having on passengers’ knowledge of their rights under Regulation 261/2004 and limit their negative impact on carriers’ relationships with their passengers.