American Airlines engaged in mass shutdowns of AAdvantage accounts four years ago over customers who used invitations to apply for Citibank credit cards which didn’t say circumvented rules limiting how often one could get a bonus. People lost millions of miles. And there’s a new lawsuit against American Airlines over taking these miles away.
What happened is that some people created fake accounts to get these mailers that allowed them to apply for cards over and over – at scale. Some people may have gotten caught up in the account shutdowns who were far more innocuous.
- When you’d open a new AAdvantage account, you’d receive an offer to apply for a Citibank credit card. That invitation didn’t prevent you from earning a bonus if you’d earned one in the past. After all, it was being sent to someone with a brand new account.
- These invitations were transferable. Some people may have opened an account for a child taking a trip, and used the invitation themselves. That’s pretty innocuous. But I don’t know of anyone whose account was shutdown for doing this just once.
- Most cases seem to be people who either opened fake AAdvantage accounts (think: in the name of fake people or pets) or who purchased invitations on Reddit or FlyerTalk for $5 – $50 each.
- People getting 4 or more initial bonuses from Citibank personal cards in two years (when the normal limit is currently one per 48 months) seemed to get shut down).
Everyone who contacted me about this when their accounts were shut down, as I asked questions, more of their story comes out than they offered initially. Usually they stop answering my questions. It seems, anecdotally, that most of the people caught weren’t as innocent as they presented themselves at first.
That doesn’t mean there weren’t people innocently swept up in the shutdowns. For instance, here’s one member who says they accumulated miles in their own account only based on application invitations sent to their children after opening AAdvantage accounts for their kids. They used four mailers in two years.
More common though were people opening more than 20 AAdvantage accounts and over 50 credit cards over a four year period.
What American Airlines Says About These Shutdowns
Here’s what American told its agents at the time that accounts were being closed, to arm them with information when customers called:
According to an American Airlines DOT filing in response to complaints, American learned about the tactic for getting unlimited card bonuses by monitoring FlyerTalk and Reddit.
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.” In other words, Citi programmed their systems poorly.
American argued falsely that the existence of a 48 month rule on most applications means that it really should apply to all applications, even though application rules have changed regularly over time.
They also argued that bonuses are only for “first-time account holders” which is obviously untrue when they simultaneously argued that bonuses should be read as only available every 48 months, even when an application neither says so nor enforces this rule.
online commentary about these card shutdowns and this case, assuming that the bonuses themselves were profitable to American.
- American benefits from adding credit card customers
- So, generally, an airline and co-brand issuer ‘partner’ on acquiring customers
- The bank will pay for initial bonus miles, but won’t pay as much for those miles as they do for miles earned from ongoing spending
- American receives an amount that’s closer to their internal cost for up front bonuses.
My understanding is that a mile ‘costs’ around 74 basis points to produce, though when a passenger receives miles for tickets flown the airline will book around 1 cent apiece for those miles as future transportation liability. I believe American’s co-brand partners will pay about one cent per mile on acquisition bonuses.
Customers Could Also Apply Inflight For A Barclays AAdvantage Credit Card
This Lawsuit Seems Like A Long Shot
The class action seeks to include customers whose accounts were shut down in late 2019, past the four year statute of limitations. The theory in the filing is that it didn’t begin running when AAdvantage accounts were closed, because American’s explanations of the closure were generic, and the clock only started ticketing once the members got a detailed explanation of why their accounts were closed. For this, the plaintiffs need a judge to indulge the theory that not giving more detail on the closures was ‘fraudulent concealment’.
What the case comes down to is that
- Generally American can do what it wishes, and its terms even say class actions are excluded,
- There were some pretty bad actors, who misrepresented themselves to gain bonuses and those customers make bad plaintiffs.
This is going to be tough as a class action because members of the class are distinguishable, and bad actors aren’t going to get successfully lumped in with a handful of customers who may have unfairly had their accounts closed – and this latter group seems pretty small.
Here’s a copy of the lawsuit (.pdf).