Earlier this week, the U.S. Department of Transportation (DOT) initiated an inquiry into the rewards programs of the four largest U.S. airlines, aiming to protect consumers from potentially unfair practices. U.S. Secretary of Transportation Pete Buttigieg has mandated that American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines provide detailed reports and records about their rewards programs.
This investigation follows a joint public hearing by the Consumer Financial Protection Bureau (CFPB) and DOT earlier this year, which highlighted concerns about the transparency and fairness of airline rewards programs.
“Points systems like frequent flyer miles and credit card rewards have become such a meaningful part of our economy that many Americans view their rewards points balances as part of their savings,” said Secretary Buttigieg. “These programs bring real value to consumers, with families often counting on airline rewards to fund a vacation or to pay for a trip to visit loved ones. But unlike a traditional savings account, these rewards are controlled by a company that can unilaterally change their value. Our goal is to ensure consumers are getting the value that was promised to them, which means validating that these programs are transparent and fair.”
The DOT’s probe will focus on several key areas:
- Devaluation of Earned Rewards: Airlines may retroactively change the value of rewards, increasing the number of points needed for redemption or imposing new restrictions. The DOT will examine changes made to rewards programs over the past six years and their impact on consumers.
- Hidden and Dynamic Pricing: The true dollar value of rewards can be obscured, making it difficult for consumers to assess their value. The DOT will require airlines to disclose the average dollar value of reward points and practices related to dynamic pricing.
- Extra Fees: Airlines often charge fees for maintaining, redeeming, or transferring points. The DOT will investigate these fees and their justification.
- Reduction in Competition and Choice: Airline mergers can reduce competition and choice for consumers. The DOT will review mergers involving rewards programs and their impact on consumers.
In May 2024, Secretary Buttigieg and CFPB Director Rohit Chopra held a public hearing where smaller U.S. airlines expressed concerns about how rewards programs are leveraged by larger airlines. DOT officials have also met with 11 U.S. airlines to discuss their rewards programs.
The DOT has the authority to investigate and take action against airlines for unfair or deceptive practices and unfair methods of competition in air transportation. This inquiry aims to ensure that airline rewards programs are fair, transparent, and competitive, providing consumers with the value they were promised.
