The Consumer Financial Protection Bureau (CFPB) is examining a rise in consumer complaints related to credit cards rewards. During the Consumer Bankers Association Live conference earlier this week, Rohit Chopra, Director of the CFPB, noted heightened scrutiny in this area and hinted at potential enforcement actions.
“What the marketing gurus and consultants are telling credit card issuers is that they should focus consumers’ attention on splashy rewards, but then withhold information from them when they’re paying lots of interest and could switch to a lower-rate card, even within the same bank,” Chopra told press.
Lack of Understanding
Often, the terms and conditions outlined for consumers tend to obscure the truth about rewards. For example, as Chopra noted, the fine print can be so all over the place and confusing that it allows card issuers to revoke rewards, making it challenging for consumers to redeem the rewards they’ve been accumulating.
Transparency Needed in Credit Card Rewards Programs
What’s needed is clear transparency around what is available to consumers, ensuring there are no surprises later on. Without proper transparency, consumers can be misled, resulting in frustration and financial loss.
The CFPB isn’t solely scrutinizing credit cards rewards; it’s also closely monitoring the buy now, pay later space. As previously reported, the BNPL sector is under considerable scrutiny due to the lack of regulation. Just like the lack of clarity in credit card rewards programs’ fine print, the BNPL space has its own intricacies, and many consumers aren’t fully aware of what they’re signing up for when they opt for the service.
“We’re starting to see ‘buy now, pay later,’ firms shift from being at the point of sale with retailers to now selling goods through their own proprietary apps, using lots of personal data to induce more purchasing and borrowing,” Chopra said. “So that obviously raises issues that we continue to look into.”