Here’s the potential impact on your points and miles.
Federal authorities are turning their attention to the rewards and mileage earned through credit card usage, with potential regulation on the horizon that could benefit cardholders.
Scrutiny on Credit Card Rewards
During a joint hearing held by the Department of Transportation and the Consumer Financial Protection Bureau (CFPB) on Thursday, officials discussed the complexities and opaqueness surrounding credit card rewards and frequent-flier programs. Both agencies expressed concerns over the increasingly intricate nature of these programs, which they deemed confusing and lacking transparency for consumers.
Transportation Secretary Pete Buttigieg remarked on the substantial value contained within these programs, emphasizing the importance of fair handling, especially considering that the value of points is solely determined by the issuing companies.
Identified Problems and Consumer Complaints
In a report released on the same day, the CFPB highlighted several issues plaguing credit card rewards programs, including limited redemption options, convoluted terms, and instances of devalued or denied rewards despite meeting the stipulated criteria. The agency based its findings on an evaluation of numerous consumer complaints related to these programs.
Industry Response and Background
Richard Hunt, Executive Chair of the Electronic Payments Coalition, criticized the hearing as political retaliation against companies opposing proposed legislation that could regulate credit cards and their associated reward programs. He underscored the significance of credit card rewards for millions of Americans, particularly low- to moderate-income individuals, as a means of financial support.
Both the CFPB and the DOT have recently implemented measures targeting practices within the credit card and airline industries. The DOT introduced new rules mandating airlines to offer cash refunds to travelers in case of flight cancellations or significant alterations, while the CFPB capped credit card late fees to a fraction of their previous amounts.
The Significance of Frequent-Flier Miles
Buttigieg underscored the importance of credit card rewards programs within the airline industry, noting that airlines sell flight miles to credit card issuers in bulk, who then offer them to cardholders as rewards. These programs have evolved into a substantial revenue stream for airlines, surpassing earnings from actual flight operations.
Consumer Challenges and Regulatory Considerations
Consumer advocates and industry experts highlighted challenges faced by consumers due to the dynamic nature of modern reward systems. While such systems have facilitated increased access to flight bookings, they have also led to a lack of transparency regarding the value and redemption of reward miles. Consumer complaints include instances of devalued miles and loss of accumulated points due to technical issues during transfers.
Regulatory Outlook and Future Considerations
Despite the ongoing scrutiny, experts believe that significant changes to credit card and frequent-flier reward programs are unlikely to occur immediately. Both agencies are still in the process of understanding the complexities of these systems and have not yet determined regulatory actions. However, potential areas of focus may include enhancing transparency and addressing anticompetitive practices within the industry.
Conclusion: The Future of Credit Card Rewards
While the future regulatory landscape remains uncertain, it is evident that credit card rewards programs will continue to play a significant role in consumer finance. However, today’s hearing shed light on consumer concerns regarding fairness and transparency within these programs, indicating a potential need for regulatory intervention to safeguard consumer interests.
