Credit Card Rewards Programs Under Review by CFPB
The Consumer Financial Protection Bureau is starting to review whether credit card rewards programs are misleading to credit card users.
The result of the review may be new, strict rules about the transparency of rewards programs, including details about cash back offers, mileage awards and how these rewards must be redeemed.
“We will be reviewing whether rewards disclosures are being made in a clear and transparent manner, and we will consider whether additional protections are needed,” said CFPB Director Richard Cordray in an email to Bloomberg News.
Credit card issuers like Chase, Bank of America, Discover, Citi and American Express rely on rewards programs to attract new customers as well as increasing the use of their cards by existing cardholders.
Jim Miller, senior director of banking services at the research company J.D. Power & Associates, said, “Rewards are the No. 1 reason why customers select the card, and there’s almost a battle to provide the highest rewards.”
“What we’ve learned over time is, our best customers value rewards. Their spend behavior changes based on rewards,” said Edward Gilligan, the President of American Express.
The CFPB’s restrictions could put a damper on each company’s ability to draw in new cardholders.
While there are no apparently abuse issues with rewards programs at this time, the CFPB is taking the initiative to catch a problem before it happens.
Keep an eye out for notices from your credit card issuer about changes in your rewards program. Changes, or at least clarifications, could come as a result of this examination.