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)

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