Will CFPB’s Scrutiny Change the Face of Credit Card Rewards?

Consumers like credit card rewards — that’s a truism borne out by PYMNTS Intelligence research.

And it may be the case that scrutiny — and perhaps new rules — from the Consumer Financial Protection Bureau (CFPB) might change the way those rewards programs are designed.

As reported earlier this week, CFPB Director Rohit Chopra said Tuesday in remarks to reporters that the Bureau will look at rewards programs, in the wake of an increase in the number of complaints the agency has received from consumers.

What’s Under the Microscope

Among the issues to be examined: Whether and how some credit card issuers conceal terms and conditions that may allow them to revoke rewards or make the points difficult to redeem.

The news follows Chopra’s remarks last year that his agency would look at how points programs are constructed and how they are redeemed.

“There’s a lot of concerns about misrepresentations about how those points could be used,” he said, speaking at the Brookings Institution last year, and as quoted by Bloomberg.

In several corners of the payments realm, there’s been a movement toward points ubiquity, where statement credit are giving way to points that, at a high level, travel with the consumer and can be redeemed where and when they choose — even across platforms and payments ecosystems.

In one example, American Express cash-back cardholders have been enabled to spend their Reward Dollars on Amazon. And in terms of the mechanics of that tie-up, a single Reward Dollar equals $1 on Amazon’s website or app. Cardholders can link their eligible American Express card to their Amazon account and then select Reward Dollars as the payment method at checkout.

What Consumers Want

CFPB rules might change the face of rewards while stakeholders are still building the proverbial rocket ship while flying it, with somewhat mixed results. As noted by PYMNTS here, card-linked offers have been embraced by consumers — 97 million of them during the holiday shopping season. Those offers are a work in progress, given the fact that about half of the offers that consumers received, they said, were irrelevant to their shopping needs. Elsewhere, we’ve found that a quarter of cardholders have felt rewards programs are insufficient for their desired purchases, that redemption choices are limited and 18% say there is insufficient information on redemption deadlines.

There’s some evidence that points (and perhaps even points ubiquity) rate less highly at the moment with consumers, and perhaps cash-back might be the way to go for issuers and merchants.

Among the features that have been most favored by consumers — budget conscious as they are, in an inflationary environment — PYMNTS Intelligence data show that cash-back rewards are the top factor in influencing how card linked offers are used, valued by nearly 48% of consumers. Automatically-applied discounts followed, favored by a third of users. Cash back, the data show, is a broadly appealing feature, easily earned and easily burned.

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