US investigating airline loyalty programs
December 21, 2023 – 8:36 AM PST
WASHINGTON (Reuters) – The U.S. Transportation Department is closely examining the frequent flyer programs of major U.S. airlines for potential deceptive or unfair practices, the agency announced on Thursday. This increased oversight comes as regulators aim to ensure transparency and protect travelers in the airline industry.
The department has been engaging in recent discussions with passenger airlines to address concerns related to popular loyalty programs. These discussions cover topics such as transparency in booking award tickets, transferability of miles, and providing notice before making changes, according to two sources familiar with the matter.
Another significant issue being examined by the USDOT is the devaluation of frequent flyer miles over time, which makes it more challenging for travelers to redeem them for award tickets, a separate source revealed.
“We are committed to thoroughly reviewing complaints regarding loyalty programs and utilizing our authority to investigate airlines for any unfair and deceptive practices that harm travelers,” stated a spokesperson for the department. “DOT officials are actively engaging with U.S. airlines and gathering additional information on this matter.”
While Delta Air Lines and United Airlines declined to comment, other airlines have not yet provided immediate responses. Frequent flyer miles remain one of the most sought-after loyalty programs.
Delta, which reported having over 100 million frequent flyer members in 2020, experienced a record-breaking addition of 8.5 million members last year.
These meetings coincide with concerns raised by some members of Congress regarding frequent flyer programs.
In October, Senate Judiciary Committee chair Dick Durbin and Republican Senator Roger Marshal reached out to the Transportation Department and Consumer Financial Protection Bureau, expressing concerns about “troubling reports” of unfair and deceptive practices in airlines’ frequent flyer and loyalty programs.
The senators cited reports indicating that “airlines are changing point systems in ways that are unfair to consumers, including by devaluing points, meaning it takes more points than initially marketed to achieve the promised rewards.”
Major airlines have actively lobbied Congress this year to reject legislation co-sponsored by Durbin and Marshall, arguing that it threatens their ability to offer rewards credit cards that provide consumers with frequent flyer miles for transactions.
Durbin argues that the bill aims to address “outrageous” fees charged by Visa and Mastercard, while also promoting competition by directing the Federal Reserve to ensure that large credit card-issuing banks offer a choice of at least two networks for electronic credit transactions.
Airlines claim that there are at least 30 million U.S. airline industry credit card holders. In October, Delta revised some changes to its frequent flyer program that had been announced in September, following concerns raised by members.
Reporting by David Shepardson Editing by Nick Zieminski
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What legislative actions are being considered to address the concerns raised by members of Congress regarding frequent flyer programs
The U.S. Transportation Department has announced its increased oversight of the frequent flyer programs offered by major U.S. airlines to address potential deceptive or unfair practices. This move is aimed at ensuring transparency and protecting travelers in the airline industry.
The department has been in discussions with passenger airlines to address concerns related to popular loyalty programs. These discussions cover topics like transparency in booking award tickets, transferability of miles, and providing notice before making changes. These measures are being taken to protect the interests of travelers, according to two sources familiar with the matter.
Another important issue being examined by the USDOT is the devaluation of frequent flyer miles over time. This devaluation makes it more challenging for travelers to redeem their miles for award tickets. This concern was raised by a separate source, highlighting the importance of addressing this issue to ensure a fair and beneficial loyalty program for airline passengers.
A spokesperson for the department stated, “We are committed to thoroughly reviewing complaints regarding loyalty programs and utilizing our authority to investigate airlines for any unfair and deceptive practices that harm travelers.” The department is actively engaging with U.S. airlines and gathering additional information on this matter.
While Delta Air Lines and United Airlines declined to comment, other airlines have not yet provided immediate responses. Frequent flyer miles remain one of the most sought-after loyalty programs for travelers. Delta, for instance, reported having over 100 million frequent flyer members in 2020 and experienced a significant addition of 8.5 million members last year.
These discussions and increased oversight coincide with concerns raised by members of Congress regarding frequent flyer programs. In October, Senate Judiciary Committee chair Dick Durbin and Republican Senator Roger Marshal expressed concerns to the Transportation Department and Consumer Financial Protection Bureau about “troubling reports” of unfair and deceptive practices in airlines’ frequent flyer and loyalty programs. They cited reports indicating that airlines are changing point systems in ways that are unfair to consumers, such as devaluing points, making it more difficult to achieve the promised rewards.
Major airlines have actively lobbied Congress this year to reject legislation co-sponsored by Durbin and Marshall. The airlines argue that such legislation threatens their ability to offer rewards credit cards that provide consumers with frequent flyer miles for transactions. Durbin, on the other hand, argues that the bill aims to address “outrageous” fees charged by Visa and Mastercard and promote competition by ensuring that large credit card-issuing banks offer a choice of at least two networks for electronic credit transactions.
It is worth mentioning that airlines claim there are at least 30 million U.S. airline industry credit card holders. The discussions and potential legislative actions seek to find a balance between the airlines’ ability to offer rewards and protecting consumers from deceptive practices.
In conclusion, the U.S. Transportation Department’s increased oversight of frequent flyer programs reflects its commitment to ensuring transparency and protecting travelers in the airline industry. It is essential to address concerns related to deceptive practices, devaluation of miles, and other issues to maintain a fair and beneficial loyalty program for airline passengers. The discussions with airlines and potential legislative actions aim to strike a balance between industry interests and consumer protection.
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