CFPB to Investigate Credit Card Reward Programs

Do you understand how your credit card rewards work, and do you think they're fair? The federal government is studying reward programs.

CFPB to Investigate Credit Card Reward Programs Photo (cc) by 401(K) 2013

Is your credit card rewards program confusing? The federal government thinks it might be.

The Consumer Financial Protection Bureau is investigating whether consumers are misled when they sign up for credit card rewards, Bloomberg Businessweek says. It will examine the marketing of rewards programs, “particularly the marquee promise of a given card, such as cash back, or redeemable airline miles, and what a customer needs to do to get it.”

There’s no existing federal regulation on the disclosure of rewards, Businessweek says, and the investigation isn’t based on complaints or any perception of deceptive practices, as many CFPB efforts are.

Instead, the CFPB is taking an interest in the competitive rewards market because it believes rewards are the biggest reason consumers pick a certain card. Rewards encourage consumers to spend with that card, enabling the credit card company to rake in transaction fees from merchants on every purchase.

Many consumers don’t understand the rewards their cards offer, but it’s worth figuring out — they often amount to free money through cash back, discounted hotels, flights, gas, and other useful stuff. Check out the video below to learn how to get more from your credit card:

It’s early days for the investigation, which the CFPB isn’t even publicly talking about yet. But from what officials told Businessweek, it sounds like the agency is interested in figuring out:

  • How much participation or spending is required to get rewards.
  • Whether the conditions for receiving rewards are fairly disclosed.
  • How often the rules for getting rewards change, and whether companies are moving the goal posts.
  • Whether consumers can lose rewards, because of late payments or other reasons.

Do you think the agency should be investigating credit card rewards? What issues do you have with your credit card rewards? Comment below or on our Facebook page.

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