Transportation Department Investigates Airlines’ Rewards Programs

The U.S. Department of Transportation is reportedly closely examining the frequent flyer programs of major U.S. airlines, aiming to identify potential deceptive or unfair practices within these loyalty programs.

One of the key focuses of the scrutiny will be on transparency practices, ensuring that customers have a clear understanding of the terms and conditions associated with booking award tickets, Reuters reported Thursday (Dec. 21).

The department is also investigating the transferability of miles, according to the report.

Another area of concern is the devaluation of frequent flyer miles over time, per the report. This practice makes it increasingly difficult for passengers to book award tickets with their accumulated miles.

“We plan to carefully review complaints regarding loyalty programs and exercise our authority to investigate airlines for unfair and deceptive practices that hurt travelers as warranted,” a Department of Transportation (DOT) spokesperson said in the report. “DOT officials are actively meeting with U.S. airlines and gathering more information on this issue.”

The scrutiny of frequent flyer programs comes amid concerns raised by members of Congress, according to the report. Senate Judiciary Committee Chair Dick Durbin and Republican Sen. Roger Marshal have shared with federal regulators reports of unfair and deceptive practices within these programs.

They have specifically highlighted the devaluation of points, which requires passengers to accumulate more points than initially advertised to claim promised rewards, the report said.

In response to these concerns, major airlines have actively lobbied Congress to reject legislation that they believe could threaten their ability to offer rewards credit cards, per the report. The proposed legislation seeks to address the high fees charged by credit card companies and promote competition in the industry.

In October, Durbin and Marshal wrote a letter to Transportation Secretary Pete Buttigieg and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, asking them to look into the issues around airlines’ rewards programs.

The senators wrote in the letter that “these programs incentivize consumers to purchase goods and services, obtain credit cards, and spend on those credit cards in exchange for promised rewards — all while retaining the power to strip consumers of those rewards at any moment.”