Airline frequent flyer programs subject of federal hearing on 'unfair or deceptive practices'

The U.S. Department of Transportation will hold a public hearing on airline frequent flyer programs, the agency said Monday, part of an investigation into potential unfair or deceptive practices.

The hearing, which is scheduled for May 9, will be jointly hosted with the Consumer Financial Protection Bureau and will include a focus on cobranded airline credit cards, the agency said. It will discuss various policies and impacts on travelers.

In late December, the DOT confirmed to TPG that it was meeting with airline representatives to discuss various aspects of loyalty programs and "gathering more information on this issue."

"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," the DOT told TPG in a statement at the time.

On Monday, DOT and CFPB spokespeople said the agencies would use the coming hearing as part of its fact-finding effort.

"The joint hearing is an opportunity for DOT and CFPB to gather more information for determining if additional action is needed to ensure fair competition in these industries and a fair and transparent experience for passengers and cardholders," the agencies said in a statement.

Among the aspects of the programs being scrutinized are the transparency practices surrounding booking award tickets, the devaluation of miles over time, the transferability of points and miles, and the nature of notice given to customers when making changes to the program, according to reports in December.

The CFPB, meanwhile, is looking into "whether credit card issuers are following through on promises of rewards, points, and miles to draw in consumers and sell more credit cards," Monday's statement said.

The hearing will involve a panel discussion hosted by Transportation Secretary Pete Buttigieg and CFPB Director Rohit Chopra. Several airline and banking industry representatives will serve as panelists, including:

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• Scott DeAngelo, executive vice president and chief marketing officer, Allegiant Air
• Morgan Harper, director of policy and advocacy, American Economic Liberties Project
• Andrew Grimm, president and CEO, Apple Federal Credit Union
• Sara Nelson, international president, Association of Flight Attendants
• Lukas Johnson, chief commercial officer, Breeze Airways
• Erin Witte, director of consumer protection, Consumer Federation of America
• Robert Patrick Cooper, senior vice president and general counsel, OneUnited Bank

Notably, no representatives from the largest U.S. airlines or their cobranded credit card issuer partners will be participating.

Get caught up: DOT looking at airline frequent flyer programs for unfair practices

Cobranded credit cards have become big business for airlines over the past decade, boosting valuations of their frequent flyer programs and driving billions of dollars in annual revenue for the carriers.

Delta Air Lines, for instance, has said that nearly 1% of the U.S. GDP is spent on its cobranded credit cards. The airline earned $1.7 billion from its cobranded credit card partnership with American Express in the first quarter of this year.

In 2020, during the peak of the COVID-19 pandemic, United Airlines used its MileagePlus loyalty program to secure a $5 billion loan, valuing the program at nearly $22 billion.

Related reading:

• When is the best time to book flights for the cheapest airfare?
• The best airline credit cards
• What exactly are airline miles, anyway?
• 6 real-life strategies you can use when your flight is canceled or delayed
• Maximize your airfare: The best credit cards for booking flights
• The best credit cards to reach elite status
• What are points and miles worth? TPG's monthly valuations