Stephanie Keith/Bloomberg/Getty Images
Airport lounges are just a few of the many benefits promised to consumers who use airline rewards cards, along with upgrades, frequent flyer miles and points to book travel, purchase merchandise or even fund a college savings plan.
New York
CNN
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If you use a points and rewards credit card offered by an airline in partnership with a major bank, how much are the points you’ve collected worth in dollars? And how much do you need to spend to get the best rewards?
If you’re not sure, you’re probably not alone. The terms and conditions of such card programs can be, and in some cases are, confusing can be changed at any time.
Those were two questions discussed at a joint hearing Thursday by the Department of Transportation and the Consumer Financial Protection Bureau, in an effort to examine ways to improve consumers’ experience with — and financial return — from popular programs that can generate huge revenue. for large airlines.
“For many families looking to finance a trip or vacation, they [credit card] the benefits are really worth it. … It’s almost considered savings — something in the bank that you’ll be able to spend,” said Rohit Chopra, director of the CFPB. “[But] our review of all the fine print suggests that card companies and airlines have the power to quickly and dramatically devalue those points, making them even more challenging to redeem. … It creates confusion about the actual value of the points and raises some questions about fairness.”
In some cases, Chopra added, consumers may pay rewards card fees “with no clear possibility of a refund” when benefits are discontinued.
The discussion also highlighted concerns for consumers using rewards cards to transfer revolving debt.
“On average, consumers with revolving debt pay far more in interest and fees than they get back in rewards,” according to a CFPB report released Thursday.
The hearing was attended by Chopra and Transportation Secretary Peter Buttigieg, as well as a group of consumer advocates and representatives of several small airlines, a small credit union and a small bank. No one from the major airlines or the top 10 credit card banks was in attendance, although many were invited, according to CFPB and DOT officials.
However, before the hearing began, Rob Nichols, president and CEO of the American Bankers Association, made a statement.
“The U.S. credit card market is highly competitive, and consumers have hundreds of card issuers and thousands of rewards programs to choose from,” Nichols said, citing Morning Consult research that found 80% of credit card users have at least one credit card offering awards and that the vast majority say they value them.
Nichols also cited a bill in Congress strongly opposed by banks that aims to lower so-called “interchange fees,” which income that banks earn from credit card transactions. Such a drop in income, the banks claim, could threaten the availability of reward programs.
After the hearing, Jaret Seiberg, a financial services analyst for TD Cowen Washington Research Group, said in a note that he expected the reason for the event to be “building the groundwork for the CFPB to force changes to airline reward credit cards by ensuring miles already earned cannot be devalued and by preventing expiration of airline miles.”
But, added Seiberg, “our expectations remain that the final outcome is probably related to the elections.” We see the CFPB and DOT moving forward if President Biden wins, while Trump-controlled agencies are less likely to act.”