In a Speech on the Senate Floor, Durbin Calls Out Airlines for their Deceptive Tactics on Frequent Flyer Rewards Programs

As the Senate continues to negotiate FAA reauthorization, Durbin praises the bill for including a provision to create an Assistant Secretary position for DOT’S Office of Aviation Consumer Protection

WASHINGTON  In a speech on the Senate floor today, U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, called out the airline industry for their unfair and deceptive practices in their frequent flyer and loyalty programs.  During his speech, Durbin also highlighted Wall Street banks’ and the airlines’ false claims about his Credit Card Competition Act, legislation that would enhance competition and choice in the credit card network market, which is currently dominated by the Visa-Mastercard duopoly.  Durbin invited the CEOs of American and United Airlines as well as Visa and Mastercard to testify at a Senate Judiciary Committee Hearing to answer questions about the legislation in front of the American public, instead of behind closed doors with Wall Street investors. 

The floor speech comes as the Senate continues to negotiate a path forward to reauthorize the Federal Aviation Administration (FAA) bill, which expires tomorrow.

“One of our important responsibilities in Congress is to protect American consumers.  But allies of big business and Wall Street—who always fear threats to their bottom lines—have been working overtime to convince consumers that a bill I introduced with Senator Marshall, the Credit Card Competition Act, will do more harm than good.  And the latest tactic?  They are recruiting allies from the airline industry.  United Airlines CEO Scott Kirby recently said that our bill would, quote, ‘Kill rewards programs.’  Let me be very clear: this is false.”  Durbin said.

This past July, Forbes published an article saying that compared to other nations, airline rewards programs in the U.S. have made it more challenging to earn and redeem miles.  Millions of Americans participate in frequent flyer programs.  While these programs may have originated to incentivize and reward true “frequent flyers,” they have evolved to include co-branded credit cards and now often exclusively focus on dollars spent using these co-branded credit cards.  There are also troubling reports that airlines may be devaluing points, making it harder for consumers to achieve promised rewards. 

“Airlines make more money off the co-branded credit cards they issue than they do off their aviation programs.  At the same time, there are troubling reports that airlines use their loyalty programs to engage in abusive, unfair, and sometimes deceptive practices.  Airlines incentivize Americans to purchase goods and services, obtain certain credit cards, and spend as much money as they can on the cards in exchange forpromised rewards.  And, all the while, they retain the right to strip consumers of those rewards or alter the terms of these programs at any moment,” Durbin continued.

In October, Durbin wrote a letter to Department of Transportation (DOT) Secretary Pete Buttigieg to express his concern about these unfair practices.  DOT responded that they are utilizing their Office of Aviation Consumer Protection to initiate a review of airlines’ reward programs.  DOT has also been meeting with major U.S. airlines to get more information on their frequent flyer practices.  Secretary Buttigieg shared with Durbin that DOT has the necessary authorities to investigate these programs and take enforcement action where appropriate.  The Secretary also announced a joint hearing with the Consumer Financial Protection Bureau (CFPB), which took place this morning, to discuss airline credit cards and frequent flyer programs with industry representatives, labor leaders, and consumer advocates.  Earlier this month, Durbin questioned Secretary Buttigieg and DOT about how the agency can better conduct oversight over airline reward programs.  During his speech, Durbin also urged the Senate to pass the FAA reauthorization bill, which includes a vital provision that would create a Senate-confirmed Assistant Secretary for DOT’s Office of Aviation Consumer Protection.

“I think it is important that we put someone in this post who can have better oversight of frequent flyer programs, among other consumer protections.  We should pass a reauthorization bill as quickly as possible to ensure there is no lapse in resources for our nations’ airports, air traffic controllers, the aviation industry, and all who fly,” Durbin continued.

“Employed by the credit card and airline industries, critics have accused me of jeopardizing Americans’ airline rewards with my idea of competition.  That just is not true.  Modern day airlines have become credit card companies that also happen to own airplanes.  And it is their deceptive practices that threaten Americans’ ability to redeem rewards they have earned.  I am committed to holding both industries accountable for exploiting hard-working consumers to further line their own pockets,” Durbin concluded.

Video of Durbin’s remarks on the Senate floor is available here.

Audio of Durbin’s remarks on the Senate floor is available here.

Footage of Durbin’s remarks on the Senate floor is available here for TV Stations.

Airlines allow consumers to directly purchase points from the airlines’ websites.  But the cost of directly purchasing points can sometimes be three times the value of the points at redemption.  This means that consumers can spend three cents to purchase a point worth roughly one cent.  This disparity between the value of points at purchase and at redemption can be even more extreme, depending on when, how many, and even where on the website the points are purchased.  Airlines also charge individuals for transferring points.  However, individuals often lose the value of the points in the transfer—and that’s before adding the transaction fee.