Could We Get Government Regulation of Frequent Flyer Programs From an Unlikely Place?

Earlier the Department of Transportation’s Advisory Committee on Consumer Protections met on loyalty programs — discussing issues like whether DOT ought to require a minimum percentage of seats be available on a given flight, and whether changes in frequent flyer programs should require a certain amount of advance notice to members.

I haven’t heard anyone working in airline loyalty that’s concerned the DOT will take meaningful action here. The DOT simply hasn’t ever regulated frequent flyer programs. To enter this arena would almost certainly require a formal rulemaking process that would go on a minimum of 18 months. They won’t get anything done here during the current administration.

What does have some concerned is possible action by the Consumer Financial Protection Bureau. They regulate financial products, including credit cards, and loyalty co-brand credit cards. The CFPB could require that points earned via credit cards have various characteristics. And just as CFPB forbids changes to pricing (annual fee, interest rates) within a year of card signup, they could impose rules about changes to the value of points earned on cards without a certain amount of notice.

And existing agency leadership are incentivized to push through their priorities quickly, and their internal processes allow them to do so with greater flexibility than DOT’s.

In a world where Hillary Clinton doesn’t succeed Barak Obama as President, the CFPB changes markedly. So, like the EPA, agency leadership wants to push through as much of their agenda as quickly as they can to hedge against that risk. While I’m skeptical that loyalty points rewarded by banks (whether through their own proprietary programs or in conjunction with co-brand partners) are such a priority, more than one industry executive and consultant is staying up at night worrying that it is.

I rate this a long shot, but not p=0.

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. Still not understanding where the DOT does not have the right, specifically, you stated, “The DOT simply hasn’t ever regulated frequent flyer programs. To enter this arena would almost certainly require a formal rulemaking process that would go on a minimum of 18 months. They won’t get anything done here during the current administration.”

    Yet the DOT already has the ability to investigate complaints over Frequent Flyer Mile Rights, most things have to do with our miles, I would think while investigating a complaint they also have the ability to do something about their findings.

    Public Law No: 112-95 (02/14/2012)
    FAA Modernization and Reform Act of 2012

    Title IV: Air Service Improvements – Subtitle A: Passenger Air Service Improvements –

    (Sec. 408) Authorizes the Secretary (of Transportation) to investigate consumer complaints regarding: (1) flight cancellations; (2) overbooking compliance; (3) lost, damaged, or delayed baggage; (4) fares; (5) incorrect or incomplete fare information; (6) frequent flyer mile rights; and (7) deceptive or misleading advertising.

  2. I think the airlines should be free to choose the programs that work best for them and then suffer the negative consequences “if” those programs do not sit well with customers. But as pymnts.com puts it regarding the CFPB , “there is great risk in assuming you know what is best for the consumer”. As I understand it, the CFPB operates under a single Director who is appointed by the POTUS for a five year term with no clear external oversight and not even it’s own IG. It’s unclear to me if the CFPB would do any better controlling my flier benefits than the airlines. I think the travel industry would be healthier having airlines compete in an open market with differing products than force all airlines to offer a similar program. But perhaps that is the very reason why some legacy airlines might actually promote the concept of CFPB regulation. .

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