Rewards programs have increasingly become a tipping point for consumers when deciding which credit card to apply for. In a market with hundreds of participants, credit card companies have begun to differentiate themselves by offering unique packages of bonuses and perks to customers. However, while rewards programs such as airline miles or cash back may seem simple, over the years the terms and conditions associated with these programs can be more complex.
The intricacies of these rewards programs has proven difficult for some consumers to understand and it is unclear if the disclosures associate with the programs are sufficiently clear. For example, not meeting monthly increases in spending minimums or missing monthly payments may result in forfeiture of rewards. While over two thirds of credit card solicitations issued by the major card companies included rewards programs information, a recent survey indicated that only 59 percent of cardholders believed they “completely” understood their rewards plans.
In recent correspondence, CFPB director Richard Corday noted that credit card company reward programs will be under review, calling some current programs “detailed and confusing.” Although information regarding the pervasiveness of these confusing rewards program disclosures has not been released, the CFPB has vocalized its intent to take a proactive approach to ensure that disclosures are clear and transparent due in part to the large amount of rewards programs that are currently being advertised.
Currently, there are no federal laws specifically addressing credit card rewards disclosures. Although the Card Act of 2009 was enacted to regulate credit card companies in order to protect consumers, the law's intent was mainly to keep consumers informed about interest rate hikes and to limit fees credit card companies could charge. What regulations, if any, the CFPB will ultimately create on this issue is yet to be determined. As a larger issue however, the CFPB’s interest in regulating an area of consumer finance that has yet to hear general public outcry shows a proactive approach to attack potential consumer issues before they occur.