Late last year American Airlines started locking AAdvantage accounts and cancelling pending award travel for people they believe took advantage of a ‘loophole’ to sign up for multiple Citibank credit cards.
Normally there are limits on how often you can get a single card and initial bonus on an AAdvantage Citi card (e.g. not more often than once every 48 months). However new American Airlines frequent flyer accounts were being sent a mailer with a code to apply – and the application process bypassed these restrictions. So people were opening up new accounts, sometimes in the names of their pets, in order to generate mailer codes they could use.
Some people abused this in a scaled-up way, and even sold the miles. Others were caught up in the dragnet who, in my view, didn’t actually do anything wrong.
- they opened an account for their child (real person!)
- they then used the code that came in the mail that specified no restrictions on who could use it
Although everyone that’s contacted me about this, as I’ve asked questions, more of their story comes out than they offered initially and often they stop answering my questions. It seems, anecdotally, that most of the people caught weren’t as innocent as they make themselves appear at first blush – which in no way means there aren’t people who are perfectly innocent.
However if Citi and American Airlines wanted to impose initial bonus restrictions on this application path, they should have done so.
Several customers whose accounts were shut down filed complaints with the Department of Transportation. American Airlines has now responded (.pdf download) to a formal complaint that was submitted by Maria Borges. (HT: PaxEx.aero)
American’s response reveals some really detailed sleuthing on their part. But first, the paragraph of American’s regulatory answer that is why they’re going to win: even if there are such people, the complainant isn’t someone innocent getting caught up on a broad sweep.
In fact, between the Complainant, her son-in-law and daughter, 45 Citi Card accounts were opened over a four-year period, entailing more than 1.4 million miles in New Account Mileage Bonuses. The 45 Citi Card accounts do not include an additional nine Citi Card accounts associated with the Complainant’s street address but established under names different than the Complainant, her son-in-law or daughter.
Over a similar timeframe, a further 16 AAdvantage accounts were established by the three of them.10 The 16 AAdvantage accounts do not include five additional AAdvantage accounts associated with the Complainant’s street address but established under names different than the Complainant, her son-in-law or daughter. Of those five additional AAdvantage accounts, two have been terminated due to fraudulent accrual of New Account Mileage Bonuses.
Hoping to avoid detection, the member apparently voluntarily closed their AAdvantage account so that it wouldn’t be audited and award tickets cancelled. When faced with a schedule change they sought to redeposit miles – which they couldn’t do into a closed account, and which they were unable to do into a new account that they opened.
Some interesting things about American’s argument:
- American learned about the tactic by monitoring FlyerTalk and Reddit. Several pages of posts were included in their response as an exhibit.
- They ascribe the lack of a bonus restriction on the application people were using as “due to a technical issue” that “certain unscrupulous individuals” used “to circumvent security protocols.” They say bad facts make bad law, and it’s easy to cast aspersions such as this given the facts of the complaint here.
- American argues that since the standard 48 month language restricting frequency of initial bonuses appears “when accessing the online application via aa.com” that it should be considered to apply to all offers. In fact they argue that someone clicking on an application, and being shown a bonus restriction, is on notice that bonuses are restricted even though future applications contain different restrictions (24 months became 48 months in this case) or no restrictions at all. That’s absurd.
- In another inconsistent claim they argue that “the Citi Card application expressly states that the offers are for first-time account holders” at the same time they acknowledge allowing cardmembers to obtain such offers again after 24 and then 48 months.
- They contend that the restriction on bonuses is part of “Citi’s terms” although of course terms vary by offer and the offers in question contained no such terms which is the point. American’s attorneys seem to be hoping that the DOT will apply a standard seemingly at odds with industry convention and standard understanding of financial regulation.
- American can tell what link someone clicked on to apply for a card. They aren’t fooled by a “.” in a gmail address. They can and will pull call center tapes when it suits their convenience to investigate a DOT complaint (good luck getting them to do it when it supports your position).
- American insinuates that the person filing the complaint isn’t even really the person behind all of this, notes that the complaint was filed without “signature verification” and asks DOT to insist on a re-submission.
To maintain the integrity of the Department’s important procedural requirements, American respectfully requests that the Department promptly direct the Complainant to re-submit a copy of the Complaint dated April 30, 2020, with the signed verification required under § 302.4(b) attached thereto.
Ultimately American argues that the member (1) “engag[ed] in a fraudulent scheme to accrue bonus miles to which the member is not entitled” and (2) “Misrepresent[ed themselves] by opening multiple AAdvantage accounts using false information.”
Their arguments for the first proposition are contradictory and weak. Their arguments for the second proposition are very strong, and all they need to win. Hopefully the DOT won’t be fooled and grant them both sets of arguments.