Department of Transportation Has Announced an Audit of Frequent Flyer Programs

Earlier this year the Supreme Court limited the ability of consumers to sue frequent flyer programs, suggesting that the Airline Deregulation Act prevents state law claims against frequent flyer programs because it requires that all regulation of the airlines be done at the federal level.

Strictly speaking you could sue for direct breach of contract in state court but could not make a state claim like a “covenant of good faith and fair dealing” — the terms and conditions of your frequent flyer program are what they are, no matter how one-sided. Your only recourse is to the Department of Transportation.

But the Department of Transportation doesn’t regulate frequent flyer programs.

They are, however, initiating an audit this month of programs and in particular their compliance with disclosure rules.

The Transportation Department’s inspector general plans to conduct an audit of frequent flyer programs to ensure that airlines are in compliance with disclosure requirements. In a memo to the DOT general counsel, who oversees enforcement, the inspector general noted that the department does not directly regulate the terms of frequent flyer program contracts, but it does require disclosure of their rules.

The DOT also provides “guidance” on disclosing costs: Any government fees or taxes or mandatory carrier charges, including processing fees charged to members of awards programs, must be shown on the airlines’ websites. Failure to adhere to the guidance “could constitute an unfair and deceptive practice,” the memo said.

The audit is being done at the behest of a single member of Congress, Representative Alan Grayson.

Here is the DOT Inspector General’s letter (.pdf)

The key item flagged for DOT review is “transparency for consumers when airlines change their frequent flyer program terms and conditions”.

Under existing law, frequent flyer programs can do anything they want to you. They just have to tell you they’re doing it.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Pingbacks

Comments

  1. Well what exactly did they expect would happen when they allowed them to merge into 3.5 major airlines. Now there just isn’t enough competition.

  2. Very interesting indeed.

    Given the broad terms upon which terms and conditions may be changed at a program’s whim, I do not believe this will amount to much. But the audit might identify certain suspect practices, signalling to the programs that they invite regulation if they do not “self regulate”, in a fashion DOT deems reasonable, their fiat currencies known as frequent flyer miles.

  3. This guy Grayson has way too much time on his hands. I don’t know how he got elected, but he’s know to be an a$$, in general. Now watch we all get screwed by this somehow.

  4. And in other news Delta was audited and they found out of 150 million Delta Sky Miles members just 3 travelers successfully redeemed their sky pesos for seats @ the lowest available redemption levels. Only later was it found out that those folks were related to the CEO of Delta Richard H Anderson

  5. Grayson is not an a$$. Also, I don’t see how this could result in our getting screwed any worse than we already have been by the airlines — whether in their flight operations or their FF programs or anything else. 🙁

  6. I want to second that I think Grayson is not an a$$. In many cases he is clearly standing up against monied interests.

Leave a Reply

Your email address will not be published. Required fields are marked *