Even in the shadows mileage brokering is a $600 – $700 million a year business. One platform is trying to provide transparency and assurance to an industry that’s full of scammers. But in many cases the transactions are against the rules and still carry risk.

Mileage Brokering Is Against Nearly All Loyalty Programs’ Rules

I’ve always cautioned readers to avoid mileage brokers. Buying and selling miles is against the terms of nearly every program in the world. Not illegal in most jurisdictions, but it can get your account closed forefeiting all of your points.

And even for those who say “I have no future with this program anyway” since these transactions occur in the shadows there are enough bad actors that individual members often find themselves fleeced – without their points (either because they were used or their account was cancelled) and without payment.

A Transparent Place For Illicit Trades?

Gary Michel of Universal Rewards Exchange has had his team sending out media pitches and I thought that was interesting, a website that tries to create a transparent marketplace in brokering points.

He acknowledges that the transactions he’s hosting will “sometimes possibly break the terms and conditions of the airlines” (cough) and starts focusing on the argument that the consumer is getting the short end of the stick with rewards programs and he’s providing some balance.

Not buying that he says, essentially, look this is a big market “$600-700 million a year that brokers are trading in aftermarket miles” and he thinks he can earn a percentage of that by creating a more open and secure environment (“for those who want to trade, there should be a safe environment with vetted travel agents.”).

• He says that brokers and agents are vetted, they verify a user’s identity and host reviews of transactions.

• And claims that in the last 4 years only one broker “went under and owed people money”

• For 2% of a transaction they escrow funds to make sure people get paid for their miles.

Are Any Transactions Safe To Pursue?

I asked Michel what if an American Airlines corporate security employee signs up and verifies their identity on the platform? That’s up to the broker to suss out but he acknowledges “I personally would never touch selling American Airlines.” But once you take airline and hotel points out of the equation, what’s left?

People are selling gift cards on the platform – buying Marriott gift cards at a discount during recent promotions, and reselling them at less of a discount. And some people are willing to buy travel for someone else using their bank points at a discount to face value of those points. Although even there I don’t want to run afoul of credit card relationships that I have.

The Problem With Living Outside The Law Is You No Longer Have Its Protection

At the end of the day there’s huge value in unredeemed points liability. Redeeming those is costly to loyalty programs. And brokered points will generally go towards the highest-value redemptions. Loyalty programs usually make selling and trading their points illegal to control costs and to maintain a monopoly on sales. Who would buy miles at list prices when they could buy those same points for less in an aftermarket?

As long as transactions remain against the rules there’s a lot of risk. The famous adage applies, “The problem with living outside the law is that you no longer have its protection.” A platform may attempt to reduce that risk, but to the extent the platform is publicized it seems like risk goes up not down (which is why I was surprised they were looking for attention).