Federal Scrutiny on Airline Loyalty Programs
The transparency and fairness of airline frequent flyer programs are now facing federal attention. The U.S. Department of Transportation(DOT) and the Consumer Financial Protection Bureau announced a significant move. A public hearing is on the books for May 9. The main agenda is to delve into cobranded airline credit cards and their associated practices.
Investigation into Fair Practices
Late December revelations highlighted ongoing meetings. The DOT engaged with airline representatives to dissect loyalty program intricacies. The critical aim was to shine a light on practices possibly veiling unfair or deceptive elements. A promise was made. The DOT vowed to scrutinize complaints surrounding loyalty programs rigorously. Their authority would be exercised to unearth and address practices that disadvantage travelers.
This joint venture between the DOT and CFPB marks a concerted effort to ensure fair competition. The statement issued on Monday emphasized this hearing as a key part of their fact-finding mission. It aims at creating a fair, transparent experience for passengers and cardholders alike.
What's Under the Microscope?
Several concerns are under examination. The focus spans several critical aspects of frequent flyer programs. Transparency in booking award tickets, the devaluation of miles, points, and miles transferability, and notifications about program changes are under scrutiny. Additionally, the CFPB is probing whether credit card issuers fulfill their reward promises. These moves ensure consumers are not lured under false pretenses to obtain credit cards.
Panel Discussion and Industry Representation
A panel discussion is on the agenda for the hearing. It will feature notable figures, including Transportation Secretary Pete Buttigieg and CFPB Director Rohit Chopra. Panelists from various sectors will lend their insights. Among them are Scott DeAngelo from Allegiant Air, Morgan Harper from the American Economic Liberties Project, Andrew Grimm from Apple Federal Credit Union, Sara Nelson from the Association of Flight Attendants, Lukas Johnson from Breeze Airways, Erin Witte from the Consumer Federation of America, and Robert Patrick Cooper from OneUnited Bank.
Notably absent will be representatives from the largest U.S. airlines and their cobranded credit card issuer partners. This absence raises questions about the breadth of perspectives presented during the discussions.
These programs are crucial for airlines. Cobranded credit cards have been at the heart of their revenue plans for over a decade. Delta Air Lines, for instance, has shown significant gains. This comes from its collaboration with American Express, which demonstrates the enormity of these programs' operations. Similarly, United Airlines highlighted the economic power of its MileagePlus program. During the COVID-19 outbreak, it obtained a $5 billion loan, the value of which was tied to the program's estimated worth.
The upcoming federal hearing aims to peel back the layers of airline frequent flyer programs. It seeks to ensure that the programs operate within a framework of transparency and fairness, devoid of practices that could potentially harm consumers. With billions at stake and the travel experience of millions of passengers on the line, the outcome of this hearing could mark a pivotal moment in the regulation and operation of airline loyalty programs.
