Credit card issuers with rewards programs that offer airline tickets to cardholders may have to make new disclosures under provisions of the U.S. Department of Transportation’s Enhancing Airline Passenger Protections rule that become effective on January 24, 2012.

Full Fare Disclosure. The DOT rule requires a “ticket agent” that advertises passenger air transportation to state the total price to be paid by a consumer, including government-imposed taxes and fees and mandatory carrier- or agent-imposed fees. For its definition of “ticket agent,” the rule looks to the Airline Security Improvement Act of 2000, which defines the term to mean one who “as a principal or agent sells, offers for sale, negotiates for, or holds itself out as selling, providing or arranging for, air transportation.” Under this broad definition, a card issuer who offers airline trips through its rewards program could, in certain circumstances, qualify as a “ticket agent.”

As a result, if an issuer that meets the definition of “ticket agent” allows cardholders without enough rewards points or miles for a free ticket to make a separate cash payment to cover the shortfall, the DOT rule would require the issuer to display the full fare of the ticket purchased, including all taxes and other fees.

Baggage Fee Notice. Under the DOT rule, a “ticket agent” with a Web site accessible for ticket purchases that displays full fare quotations must “clearly and prominently” disclose that additional airline fees for baggage may apply and indicate where consumers can see those fees. It would be sufficient to include a link next to that disclosure on the page where the full fare is displayed that takes the customer to the home page of the carrier’s Web site. Card issuers subject to the full fare disclosure requirement will also need to include the baggage fee notice.

The full fare disclosure and baggage fee notice requirements are contained in the DOT’s enforcement policy statements that provide that the DOT considers a violation to be an unfair or deceptive practice. As a result, such violations may be the subject of DOT enforcement actions in which the DOT may seek monetary penalties. The DOT has issued Answers to Frequently Asked Questions on its rule.

Ballard Spahr’s Consumer Financial Services Group produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

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