The news: Consumers are frustrated with credit card rewards programs, the Consumer Financial Protection Bureau (CFPB) alleged in a report. The CFPB said it will monitor credit card rewards programs and take action as appropriate.
- Cardholders with revolving balances often pay more in interest and fees than they get back on rewards, the CFPB said.
- And co-brand cards have made rewards programs even more complex.
The CFPB and the Department of Transportation (DOT) followed up the report release with a joint hearing on airline rewards credit cards.
What else does the report allege?
- Vague or hidden conditions keep consumers from receiving rewards. Marketing materials mislead consumers and do not match requirements detailed in the fine print of rewards programs’ terms and conditions.
- Rewards get devalued. Credit card issuers and their partners reduce the value of rewards already earned by increasing the amount needed for redemption.
- Redemption issues block or delay earned benefits. The report said customer service issues and technical glitches prevent cardholders from redeeming their rewards.
- Earned rewards get revoked. Consumers lose their rewards when they close their accounts, and some rewards expire without prior communication.
The rebuttal: This report and the public hearing were immediately criticized by credit card issuers.
- The American Bankers Association (ABA) said it was “yet another example of the CFPB putting politics over policy to the detriment of the very consumers it is charged with protecting.”
- The ABA also argued that the US credit card market is highly competitive, giving consumers thousands of rewards programs to choose from.
The takeaway: It is unclear if any action will occur as a result of the CFPB’s continued monitoring.
But given the importance consumers place on credit card rewards, actions that are too stringent could become a large stumbling block for issuers. The top reason for switching card providers is to find a better rewards program, according to JD Power.
