USDOT Launches Investigation into Airline Rewards Programs to Protect Consumers

The U.S. Department of Transportation (USDOT) has initiated a probe into the rewards programs of the four largest U.S. airlines: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. The focus is the prevention of deceptive, unfair, or anticompetitive practices. U.S. Secretary of Transportation Pete Buttigieg has directed these airlines to submit reports and records detailing their rewards programs, policies, and practices. The goal is to protect consumers against extra fees, hidden pricing, reward devaluation, and more.

Buttigieg commented, “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. 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 inquiry follows a joint public hearing earlier this year between the Consumer Financial Protection Bureau (CFPB) and the DOT, highlighting concerns about potentially unfair practices within airline rewards programs. In recent years, DOT has created new rules for airline passengers while monitoring the airline industry closely to ensure consumers are better protected. For example, DOT now requires airlines to automatically give cash refunds to passengers who are owed refunds due to a flight cancellation or a change in the flight schedule where the passenger chooses not to be rebooked. If checked baggage is delayed significantly or extra paid services aren’t provided, the new rule stipulates passengers will be automatically refunded.

Another rule to protect consumers from surprise junk fees was proposed but put on hold. The rule would require airlines to disclose extra charges, like baggage or change fees, upfront and ban “bait-and-switch” tactics on seats. Several airlines, including American, United, Delta, Hawaiian, Alaska, JetBlue, and Airlines for America, have challenged the rule, resulting in the rule being placed on hold.

Learn more about the DOT airline rewards inquiry here: https://www.transportation.gov/sites/dot.gov/files/2024-09/For%20Distribution_Letter%20on%20Airline%20Rewards%20Inquiry_Not%20Addressed_09.05.24_Final.pdf