Report: CFPB Examines Credit Card Rewards Challenges

The Consumer Financial Protection Bureau (CFPB) recently turned its attention to issues in credit card rewards programs, which could impact credit unions significantly. Their findings highlight concerns like vague terms, reward devaluation, and redemption issues—common problems that can frustrate cardholders and complicate credit management.

Challenges Highlighted by the CFPB

• Vague Promotional Terms: Often, consumers are enticed by attractive rewards offers that, in reality, come with stringent and unclear conditions.

• Devaluation of Rewards: Credit card issuers may change the value of earned rewards, increasing the number of points needed for redemption, which can undermine the value proposition of rewards programs.

• Redemption Difficulties: Technical issues and poor customer service can prevent consumers from redeeming their rewards, leading to dissatisfaction and potential churn.

• Revocation of Rewards: Issuers might revoke rewards when accounts are closed, sometimes without clear communication to the cardholder, leading to further discontent.

Implications and Actions for Credit Unions

Credit unions should take these insights seriously, enhancing their rewards program transparency and user-friendliness to avoid these pitfalls. Key actions include:

• Improving Transparency: Clearly communicate the terms and conditions of rewards programs, ensuring members have a clear understanding of what they are signing up for.

• Ensuring Consistent Value: Keep the rewards valuable and consistent, avoiding arbitrary changes that could alienate members.

• Facilitating Easier Redemption: Streamline the redemption process to prevent technical glitches and improve customer support, enhancing overall member satisfaction.

• Fair Revocation Policies: Review and communicate policies regarding reward revocation to ensure fairness and transparency.

League Member Spotlight: Andy Grimm of Apple Federal Credit Union

Andy Grimm, President/CEO of Apple Federal Credit Union and a member of the CFPB’s Credit Union Advisory Council, recently shared insights at a joint CFPB and Department of Transportation hearing. Grimm highlighted the challenges smaller credit unions face in the competitive rewards market, especially within niche areas like airline credit card rewards. His participation underscores the importance of fair regulations that do not disadvantage smaller institutions. For more details on his testimony, view the full hearing here.

Your League will continue to monitor developments surrounding the CFPB's review of credit card rewards programs. We remain committed to supporting our members through evolving regulatory landscapes and ensuring that our credit unions can maintain competitive, transparent rewards programs that serve the best interests of their members.