Interview With the Congressman Who Wants to Regulate Frequent Flyer Programs

The Department of Transportation is auditing frequent flyer programs. Now, DOT doesn’t actually regulate frequent flyer programs, but the audit is at the request of Representative Alan Grayson (D-FL) and will look at things they believe they can claim jurisdiction over — disclosure of fees associated with the programs and redemptions, and whether there’s proper disclosure of changes made to those programs (standards for which aren’t especially well-defined).

Grayson is tilting at windmills a bit here, here’s in the minority in the House, isn’t known for working especially well across the aisle, and no mainstream political commentators expect control of his branch of Congress to flip in the upcoming election.

Nonetheless, he’s got the makings of a one-man crusade. He’s got elite status (he says US Airways and American, though I don’t know if that’s a function of the airlines’ merger or that he actually has separate status in each proram) and he claims to have a balance of 10 million miles. He wants the federal government to regulate mileage programs to protect the value of his points, although his particular recommendations wouldn’t do much to help.

CreditCards.com interviewed him and it’s worth a read.

Grayson doesn’t like frequent devaluations and changes without notice to programs. I agree. (Although he’s on far less solid ground in his understanding of when airlines make award seats available).

One element is the frequent devaluations. The programs went in some cases for decades without devaluing. Now, they do it once or twice a year. Another element is the lack of availability at the touted award levels. In some areas, you can look almost a year in advance and you don’t see a single seat available at the award level that the airlines claim is available when they are advertising these programs. Another element of it is changes without notice. Historically, airlines gave changes with a year’s notice. The National Association of Attorneys General recommended that be the standard, and now we’re seeing in some cases changes with no notice whatsoever. All of those activities are deceptive.

Interestingly, Grayson sees the audit as a tool to begin pressuring airlines on changing their practices although he wants more regulation. The authority for the DOT’s investigation stems from its ability to regulate the practices of the industry. I don’t believe that frequent flyer programs are really part and parcel of air travel any longer, with a majority of points being awarded through partner activity and since air travel isn’t even necessary with most programs as the form of redemption. But the airlines wouldn’t want to make that argument, because then they would forfeit the protections from state law-based lawsuits afforded by the recent Supreme Court decision Northwest v. Ginsberg (which held that such suites are pre-empted.by the Airline DeregulationAct).

Grayson is concerned with airline frequent flyer programs — not really hotel programs, or credit card programs (in fact he sees credit card co-brand partners as getting whacked by the airlines as well.

By far the largest of the loyalty programs that involve these kinds of arrangements are airline programs. This is the focus of activity. In recognition of that, the banks have paid literally billions of dollars to try to hook up with airlines to promote their frequent flier programs to credit card holders. Although credit cards are a very large part of the program, they aren’t the focus of the deceptive elements of the programs. The deception comes from the fact that they’ve essentially created a private currency, and the airlines are cheating their customers by devaluing it.

I expect literally nothing to come from Grayson’s actions here, although I thought some readers would find it interesting.

(HT: pfdigest)


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 »

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Comments

  1. If he weren’t such a jack@ss, he might get some help from across the aisle. There cannot be more than a handful of Republicans who could stand to shake his hand.

  2. As a DC insider you should know better than to underestimate the power of a Congressional inquiry. While the chance of new legislation may be remote, such inquiries often cause sufficient discomfort and sunlight which result in businesses “voluntarily” making changes that benefit consumers. Do not forget that Obama has also added teeth to fed agencies that advocate for consumers. To be fair regulation of FF programs is not high on most priority lists…

    Personally I think transparency is a better solution than regulation. DOT should force airlines to explain when they release award tickets and how many for each route. Informed consumers can better maximize the value of points if they know the how the programs actually operate. Of course that would decrease the value provided by all the bloggers….

  3. I have been calling for this for years now. Airlines are the side business of most of these programs, what they really are is a central bank with currency, which only they are allowed to control the value of. When they create a market where consumers buy this currency, they should expect to be regulated. Hotels and other programs have not gone this far yet, and thus they are not on the radar…but this should be a warning in case they get any ideas.

  4. Grayson, get your GRUBBY, UNWASHED PAWS off of the airline industry! You will only do something to cause something to result in us losing miles, redemption awards, or cause us to PAY A HIGHER PRICE! HANDS OFF!

  5. Leave it to a Liberal power hungry congress lifer to want to regulate something else. Maybe we should start a new agency and fund it with pork as well. Stupid.

  6. Good luck to him, he’s someone I have long admired. He speaks his mind and I agree with most of what he says.

  7. Maybe because we will be paying for his congressional pension the rest of our life?

    “A full pension is available to Members 62 years of age with 5 years of service.”

    Unlike social security, the age at which you receive the pension has not been going up.

    @DaninMCI, how is someone who never held elective office until age 50 a “congress lifer”?

  8. As a famous man once said, the scariest phrase in the English language is “I’m from the Government, and I’m here to help”. 🙂

  9. Since the government facilitated the destruction of ff program benefits by allowing the industry to consolidate and eliminate competition, it should have some say in the consequences of these mergers. At least this congressman is trying to do something about it. Gary, you bloggers talk a lot about how bad these changes are and that we can expect more of them, but you offer no options for resisting the onslaught. Why?

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