Buttigieg on credit card points, airline miles and transparency

The Department of Transportation and the Office of Consumer Financial Expectations are turning their attention to airline rewards programs and credit cards — you know, when you get points for miles.

On Thursday, the two government bodies A hearing was held aimed at increasing transparency around these programs, such as the number of points it is worth. To learn more about these efforts and how they can help consumers, “Marketplace Morning Report” host David Brancaccio spoke with Transportation Secretary Pete Buttigieg. Below is an edited transcript of their conversation.

David Brancaccio: I know it can be annoying when your airline or credit card frequent flyer changes your loyalty program rules. But aren’t these just privileges that come easily and easily go?

Pete Buttigieg: Well, I guess it’s not just perks; They are increasingly something we consider as part of our savings. When you’re getting ready for a vacation, you can save your money for that, and you can also save your miles or your points for that. So the difference — of course — is different from the money in your bank account, there’s a company that can unilaterally decide to change the value of those points or miles. We want to make sure that, like everything else of value in our economy, any transactions and any announcements about this are fair, honest and transparent. As you know, we have a responsibility as a department to look out for any unfair and deceptive practices in how airlines market their flights. We’re increasingly realizing that part of that means making sure that we understand what’s going on with these points and miles programs.

Brancaccio: I want to get back to transparency, but what are some of the complaints that your team and the CFPB are looking at?

Buttigieg: Well, one of the issues we’re concerned about is currency devaluations. You think the points are worth a certain amount, and then that changes. This is especially important if you make a decision, such as deciding to book a ticket at a higher price or signing up for a credit card with a high annual fee or higher APR because you believe you are getting a certain value in terms of points in return. If they change that on you, that’s something to look at.

Another problem we are seeing is confusion about the actual value of points. It’s very rare for an airline to publish what they say is a dollar-per-mile or point-type rating, but in some cases, we see that they have some implied value in terms of the flights you can get – or you can even use to buy a sandwich on the plane – but at a different value. Absolutely if they offer to sell those points back to you. We even see transaction fees when you try to transfer points that are sometimes more than the total value of the points you are transferring. These are the types of things we want to take a clearer look at and get a real understanding of to make sure customers and passengers are treated fairly.

Brancaccio: It’s interesting, because you can almost tell the value of the coin, right? And then if it’s variable, depending on the situation, it would be good to at least know that it’s variable…

Buttigieg: Yes, think of it this way: You know, when you’re flipping through the magazine on the plane and you find out that you can buy a piece of chips for $5 or 500 miles. This means you think a mile equals a cent. But later when they offer to sell you 3,000 miles so you can go over the top and get that ticket you’re hoping to get, they offer it for five or 10 times that amount. These are the types of things we want to address, make sure we have an understanding and discuss whether this is fair.

Brancaccio: So, transparency – the rules should be clear. I mean, some worry that this might get lost in the fine print that only a lawyer could love, but well, it’ll be our job to read. I said fair I think. What are you thinking?

Buttigieg: We need to make sure you know what you are paying for and that customers are treated fairly. Again, this is especially important because the design of these points programs often means that you’re not choosing the product at the lowest price, whether we’re talking about credit card or airline ticket fees. You’ll consciously choose something more expensive because of the value you feel you’re getting with the points that come with that. This means that these points are something with real economic value, and like anything with real economic value, we need to make sure that any transactions around that are fair and open.

Brancaccio: In the absence of legislation, I think, do you and/or the CFPB have authority beyond holding hearings to enforce transparency and fairness?

Buttigieg: We have a lot of power here and responsibility to address unfair or deceptive practices at airlines. And we cooperate with the CFPB because of course they have a lot of power with respect to financial companies and credit card companies. Now, we don’t go into this with any preconceived conclusions. We haven’t decided on a rule or anything like that yet. But we heard enough from passengers and customers about this that we realized that in the same way that we have rules around refunds or other parts of the passenger experience, we need to take a look at this as well.

Brancaccio: Let me ask you about Baltimore in these last two minutes here. Secretary Buttigieg, your department We reached $60 million in emergency highway funds To deal with the bridge collapse in Baltimore. But it may not cost millions, but billions. Who will pay to correct this mess?

Buttigieg: President Biden has pledged that the federal government will be there to cover the cost it takes for the people of Maryland and Baltimore to build a new bridge and get back to normal. But to be clear, there have been many instances where our Emergency Relief Account has been replenished through insurance refunds or lawsuits. Obviously, if any private party is held liable, it may fall back on the taxpayer. It’s just that we can’t wait because Baltimoreans need help getting back to normal now. The Army Corps of Engineers is doing an exceptional job of reopening this canal. We expect to restart this port and have all port workers back to their jobs by the end of May. But at the same time, there is the larger, longer and more expensive project of constructing a new bridge. This has already begun too, and we will be there, as the President promised, every step of the way.

Brancaccio: Do you agree with the pace of obtaining financing? I think you mentioned before that when the I-35 bridge came down in Minnesota all those years ago, Congress moved very quickly. I think it was days.

Buttigieg: correct. Congress acted within about a week in the Minnesota case. We would like to see quick action here as well to increase our emergency relief funds, but we have never come close to running out of cash in this account to meet immediate needs.