@Niel3 @Linda108
Niel, this not is a loophole, it is definitely a glitch in the system which should not have happened! The protocol with Instant bookings is, the payment must be confirmed at the time of booking! If the payment method rejects the payment when the booking is placed, the guest should be informed that they have to submit a reservation request to the host in order to book, (they cannot Instant Book) and this then gives them 24 hours to put an acceptable payment option in place that Airbnb can access before it either becomes a confirmed reservation or lapses, and it does prevent unpaid for arrivals. This is done to protect hosts from just the scenario that you have brought up here!
It is possible the guest cancelled their bank authority and payment will now be hard to access, although that would be a stupid move on the part of the guest if they ever wish to use Airbnb again!
I would suggest you take this up via a Twitter feed! Although I do not have personal knowledge of this I understand that Airbnb's Twitter feeds are staffed by personnel who have a higher level of accessability and decision making and this could be to your advantage here with regard to this outstanding amount!
All the best Niel, I hope you can get this sorted out.
Cheers.....Rob