I don’t think I’ve shared this advice in about two years, so it’s worth highlighting how to handle things if your loyalty program account gets audited.

It’s not fool proof advice — that is, if you’ve actually broken rules in a serious way you can’t always save your accumulated mileage balance when you get caught.

But it’s useful to understand what triggers audits, and what you can do if you get audited.

You’ll also want to see:

• What airlines look for to crack down on the sale of miles
  
• How airlines combat fraudulent tickets to protect revenue
  
• Preparing for the dreaded American Express financial review

Most (though not all) airline and hotel programs will let you use your points to let someone else travel. They don’t want you selling awards. Airlines want to be the sole brokers in their own miles. And whether for airline or hotel programs there’s only a limited inventory to go around. More points redemptions means it’s harder for the program to satisfy the demands of members.

Usually a program won’t know points selling goes on, unless something triggers them to look at your account. Selling awards on eBay or Craigslist is a bad idea, some programs have been known to pose as buyers to bust whomever is doing the selling.

Selling awards through a broker is a bad idea, because you likely won’t know the person who is actually traveling (increasing the risk of getting caught, and that person has no incentive to help you out) and because if the broker gets caught then anyone they work with has their account in jeopardy.

Getting audited isn’t common. Usually when they contact you it’s because there’s a pretty strong indication that you have broken rules. The flip side is that folks who aren’t breaking rules don’t often come into contact with a frequent flyer program’s auditing department.

Sometimes a fraud unit goes off the rails but most of the time programs are pretty conservative — they may investigate you and clear you, and only act to close down an account when they have overwhelming evidence. In some sense the investigation process is unfair and unbalanced, after all programs rarely look in the mirror, and you can’t investigate them when they cheat you. But tone down the outrage, here’s how you should play it.

Which Programs Are Most Likely to Audit You?

United and American have historically been aggressive tracking down members breaking program rules this way. US Airways wasn’t very active until 2010 but began investigating plenty of accounts especially after the 2009 holiday shopping promotion that many members took advantage of to buy an unlimited number of miles at 7/10ths of a cent apiece.

Hotel programs are usually far less aggressive than airlines, their awards tend to be a bit lower value and less subject to black market trading. But IHG Rewards stepped up two years ago. And Starwood has shut down accounts that abuse the feature to transfer points between members living at the same residential mailing address — since some folks have used this to trade airline miles, changing account addresses to transfer points from person’s one account to another and then on to that second unrelated person’s airline mileage program.

What Will Trigger a Fraud Review?

Here are the kinds of activity that most frequently draw the scrutiny of fraud departments of mileage programs. While not an exhaustive list, these are some of the biggest factors:

• premium class international award redemptions for other people, especially several in a short period of time.
  
• heavy mileage earning from a single partner or source
  
• one or more of the above across multiple accounts accessed from the same computer or IP address
  
• sponsoring upgrades for multiple different individuals
  
• selling awards

When there are especially rich bonus opportunities, and members load up on miles quickly, airlines sometimes take notice and look carefully at whether the miles are being used to obtain high value awards for unrelated people.

What Happens When Your Account Gets Audited?

If you’re contacted by a program about irregular activity in your account, the account will often be ‘frozen’ during the review period. Or you may just find that your account is frozen without any contact from the program at all.

It can be difficult getting responses and answers from the program, they’re going to act on their own timetable and in most cases there’s little that can be done to goose the process.

What’s more, front line customer service agents probably won’t have answers, information will be held by the group that actually does the auditing and those folks aren’t usually easy to contact.

That’s a huge inconvenience for members acting within the rules of the program who want to use their miles.

The program may have questions, or ask for documentation about certain transactions, and if they can’t convincingly demonstrate that you’ve broken the program’s rules your account will likely be unfrozen.

The Scariest Audit: In Person Confrontation During Travel

Folks have had tickets voided and have even been met during travels by airline personnel. Those are cases where a program thinks pretty convincingly that they’ve ‘got you’.

Here are the sorts of questions that might get asked when met at the boarding gate:

• How did you upgrade/pay for the ticket? [Do you know you’re on a mileage upgrade or award ticket?]
  
• How much did you pay for the upgrade? [trick question, gets you to admit you bought the upgrade in violation of program rules]
  
• Who sponsored you? [Do you actually know the person whose miles covered the trip?
  
  • How do you know this person?
    
  • Do you know where this person lives?
    
  • Do you have a contact number for them?

The airline wants to know if you really know the person who provided you the miles or upgrade instrument. And it’s why when I gift an award to someone, I often give them a letter or card as well to bolster the evidence that indeed it was a gift within program rules, that we know each other, and that nothing was sold or bartered.

When You Care — and When You Don’t Care — if Your Account Gets Audited

At the point where your account is audited, it’s too late for me to offer the advice not to do anything against a program’s terms and conditions with an account where you want to have an ongoing relationship with the program.

If you are an American Airlines Executive Platinum and plan to keep flying American (and have a significant mileage balance), it usually doesn’t make sense to sell an award or an upgrade — you have too much to lose.

On the other hand, the stakes are much lower with an orphan points account you don’t plan to use going forward, since except in the most extreme cases the most that will happen is you’ll have your account shut down and you’ll be asked not to fly an airline or stay with a hotel chain again.

If you’re mid-trip though, or someone you sold miles to is mid-trip, and an airline determines the ticket was acquired in violation of their rules, the ticket could get cancelled. A passenger could be stranded or face a big cost to get home.

When IHG Rewards gave out points for downloading their shopping toolbar, it turned out that you didn’t actually have to complete the download to get the points and you could earn the bonus over and over. I didn’t write about it when that ‘deal’ was live because I didn’t want to risk my readers’ accounts. I knew they would notice this come Monday morning, and people who did it would have their relationship with the program terminated.

Your individual risk tolerance for an audit and these sorts of consequences should always be in the back of your mind when pushing the envelope with a program.

What Should You Do If Your Account is Audited?

Assuming you have something to lose, and that you’d like an ongoing relationship with your travel provider, the best advice is:

• Get contact information if you can for the audit department. If you can’t, find out when you’ll hear from them. Follow up.
  
• Find out which transactions the program is questioning
  
• Gather all of your documentation surrounding that transaction
  
• Be honest. You were flagged for a reason, the program won’t tell you everything, and denials that run contrary to established facts the program is aware of will just get you in more trouble — they will act more punitively. More importantly, inconsistencies in your story may lead to scrutiny of your entire account history, not just a few transactions.
  
• But don’t be too forthcoming. Answer what’s asked of you, but don’t volunteer anything that isn’t specifically asked.

If you’ve broken program rules, offer a contrite apology. You might lose some points, you might even be asked to pay the cost of a ticket that was obtained contrary to program rules. But unless your conduct was large scale and ongoing you’ll probably be invited to continue participating in the program.

You might be asked to ‘name names’ if the program believes you’re working with a broker. Cooperating likely gets you a better deal.

Have you ever had an account audited? What triggered it? How was it resolved?