CFPB Announces Measures To Address Credit Card Practices And Fees

The Consumer Financial Protection Bureau (CFPB) has announced a series of measures aimed at addressing illegal credit card practices and reducing financial burdens.

In a communication to law enforcement agencies, the CFPB highlighted potential violations by credit card companies operating rewards programmes, such as unlawfully devaluing rewards points and airline miles.

Additionally, the CFPB published research showing that retail credit cards typically carry higher interest rates compared to general-purpose cards. The agency also launched a new tool, Explore Credit Cards, designed to help consumers compare credit card options using impartial data.

CFPB targets credit card rewards programme practices

The CFPB’s circular outlines concerns with certain rewards program practices, which have become a major strategy for credit card issuers to attract customers. According to consumerfinance.gov, rewards cards account for over 90% of general-purpose credit card spending, but consumers have reported challenges such as devaluation of rewards and unclear terms.

In May 2024, the CFPB and the US Department of Transportation held a public hearing to discuss consumer complaints and limited competition in airline and credit card rewards programmes. The CFPB’s report identified several common issues, including:

• Devaluation of rewards: consumers may choose cards based on the advertised value of rewards. If companies later reduce this value, it could constitute deceptive practices.
• Opaque conditions: vague or hidden terms in agreements may lead to the cancellation or reduction of rewards, violating consumer protection laws.
• Undelivered benefits: failures in program operations that prevent consumers from redeeming rewards may also be deemed unfair practices.

The CFPB has previously taken enforcement actions against issuers such as American Express and Bank of America for similar practices and indicated it will continue to monitor these programs.

A closer look at the Explore Credit Cards tool

The CFPB’s Explore Credit Cards tool offers consumers a transparent way to evaluate over 500 credit card options based on open data. Unlike other comparison platforms that may prioritise cards based on paid partnerships, this tool allows users to filter cards by factors such as interest rates, fees, rewards, and credit score requirements.

This initiative aims to address a lack of price competition in the credit card market by giving smaller issuers an opportunity to compete with larger players. By making average interest rates by credit tier publicly available, the CFPB aims to provide consumers with actionable insights to identify cost-effective credit options.