US regulators are looking into potential “bait-and-switch” schemes with airline credit card rewards points

New York
CNN
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If you use a points and rewards credit card offered by an airline in partnership with a large bank, what is the dollar value of points you have accumulated? And how much should you spend to get the best rewards?

If you’re not sure, you’re probably not alone. The terms and conditions of these card programs can, and in some cases are, confusing It can be changed at any time.

Those two issues were among the issues discussed at a joint hearing Thursday held by the Department of Transportation and the Consumer Financial Protection Bureau, in an effort to examine ways to improve consumers’ experience with — and the financial return from — popular programs that could generate big bucks. Revenues of major airlines.

“For many families looking to finance a trip or vacation, these [credit card] The benefits are really valuable. “It’s seen almost as savings — something in the bank that you can spend,” CFPB Director Rohit Chopra said. “[But] Our review of all the fine print indicates that credit card companies and airlines have the potential to quickly and dramatically reduce the value of those points by making them more difficult to redeem. …This creates confusion about the true value of the points and raises some questions about fairness.

In some cases, consumers may pay fees for rewards cards “without a clear option to get a refund” when the benefits are stripped, Chopra added.

Also raised in session It was a concern for consumers who use rewards cards to take on revolving debt.

“Consumers with revolving debt pay on average significantly more in interest and fees than they receive in rewards,” according to one study. CFP report Released Thursday.

Chopra and Transportation Secretary Peter Buttigieg attended the hearing, as well as a panel of consumer advocates and representatives of a few small airlines, a small credit union and a small bank. None of the major airlines or the top 10 credit card-issuing banks attended, although many were invited, according to CFPB and DOT officials.

But before the hearing began, Rob Nichols, president and CEO of the American Bankers Association, issued a statement.

“The U.S. credit card market is highly competitive, and consumers have hundreds of card issuers and thousands of card rewards programs to choose from,” Nichols said, citing a Morning Consult survey that indicated 80% of credit card users have At least one credit card. The card offers rewards and the vast majority of them say they appreciate it.

Nichols also cited a bill in Congress that banks have strongly opposed, which aims to reduce so-called “interchange fees,” which Revenue earned by banks from credit card transactions. Banks say that such a drop in revenue, It could be dangerous Availability of rewards programs.

After the hearing, Garrett Seberg, a financial services analyst with TD Cowen Washington Research Group, said in a note that he expected the event to be triggered by “build the foundation for the CFPB to force changes to airline rewards credit cards by ensuring they actually cannot be depreciated.” Miles and by preventing airline miles from expiring.

But Seberg added: “Our expectation remains that the final outcome here will likely be tied to the election. We see the CFPB and DOT moving forward if President Biden wins while Trump-controlled agencies are unlikely to move.”