Two US government departments, the Department of Transportation (DOT) and the Consumer Financial Protection Bureau (CFPB) held a hearing on May 9 regarding issues around airline and credit card loyalty programmes according to www.consumerfinancemonitor.com.
If US airlines’ loyalty programmes are forced to change the way they operate, members of these programmes across the globe will be affected.
One of the concerns raised was that the loyalty programmes of the biggest US airlines have become so large that smaller airlines cannot compete. Another was the devaluation of loyalty points. A third was the lack of transparency in loyalty programmes.
An investigation into points devaluation, started by the DOT last December, has not yet reached its conclusion. This concerns airlines and credit card companies’ devaluation of frequent flyer points or miles, which makes it more difficult or expensive in points for consumers to book reward tickets.
CFPB Director Rohit Chopra has already said his agency has found some initial evidence of airlines and credit card companies devaluing points and miles.
Pete Buttigieg, US Secretary for Transport said consumers chose airlines or credit cards based on promised rewards, and rewards programmes needed to be fair, transparent, and predictable.
Chopra said credit card rewards took centre stage in marketing and the airlines played a massive role. Now, the CFPB wants to:
- protect reward points from massive devaluation;
- stop bait-and-switch tactics where promised rewards are not available or have been removed;
- examine exclusive deals between card issuers and airlines; and
- promote competition on interest rates.
Andrew Grimm, President and CEO, Apple Federal Credit Union, indicated that, to allow comparison, rewards programmes needed to use the same terminology.
Consumer advocate panellists noted that the value of rewards programmes had declined as concentration into four major airlines had reduced competition and that consumers would benefit from transparent practices and the elimination of bait and switch tactics.
The DOT opened up the public discussion resulting in the following comments:
*Regulators should also look at cruise and hotel reward programmes and how the redeemed rewards are not taxable income.
*Regulators should look at airlines’ efforts like those of American to eliminate travel advisers from bookings.
*Use of rewards points brings tourism to states and supports those working in the tourism industry.
*It can be cheaper to fly by purchasing a ticket outright instead of paying the fees to redeem a reward travel ticket.
*Consumers are sometimes unable to use reward points earned.
*80% of consumers use travel rewards, 90% of them value the rewards, and cash back rewards are used to pay for basic needs.
*Consumers have fewer rights in their interactions with airlines, which is why state attorneys generally need to join in the fight.
