The CFPB Attacks the Credit Card Rewards Programs Consumers Want
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Unsurprisingly, the Consumer Financial Protection Bureau’s recent report on Credit Card Rewards is dismissive of programs that are popular with tens of millions of American households. However, its objections manifest the same sort of deceptive advertising and hiding of details that it complains are characteristic of credit card rewards, and the data in its report does not match the conclusions its director, Rohit Chopra, has made in his statement about the report as well as his testimony before Congress on the issue. 

The CFPB’s press release announcing the Credit Cards Rewards: Issue Spotlight report denigrated rewards programs, alleging that “Consumers tell the CFPB that rewards are often devalued or denied even after program terms are met;” that “Consumers who carry revolving balances often pay far more in interest and fees than they get back on rewards;” and that “Credit card companies often use rewards programs as a ‘bait and switch’ by burying terms in vague language or fine print.” 

However, the press release and testimony omit findings of the report and ignore research cited in the report that contradicts these assertions. For instance, the report notes that consumers earned more than $40 billion in rewards on major issuers’ general-purpose credit card rewards in 2022, and the average value of rewards earned grew 15 percent from 2019 to 2022.

There are other examples where the report itself is either internally inconsistent or in which the summary extracted for press release or testimony omits significant findings, which I expound on in a letter I sent to the Bureau. 

  • It cites prior CFPB research about the “benefits of rewards programs [not exceeding] the costs of credit cards,” while failing to point out that rewards are not designed or marketed as a means of defraying interest costs. 

  • It fails to acknowledge the difference between transactors and revolvers-different customers choosing different products for different reasons. 

  • While it laments the “upfront cost of offering sign-up bonuses and high earn rates” that may create barriers to entry for small banks,  these are not costs to the consumer. From a competition perspective, the report appears to argue that regulators should take steps to reduce rewards for customers because they are “unfair” to smaller issuers who lack the scale to manage them. It doesn’t even pretend to explain how consumers would benefit. 

  • The report also suggests the complexity of many of today’s rewards cards constitutes a market failure that needs to be addressed without considering that the broad diversity of reward programs gives consumers a wide variety of options that allow them to choose the program that best suits their needs. It is unclear how consumers would benefit in the aggregate if the government imposed a one-size-fits-all credit card edict.

Official pronouncements of public policy-making agencies should be more objective and balanced than the CFPB’s press release and the concomitant testimony and reflect the full content of the underlying research rather than “cherry-picking” data to advance a dubious narrative that comports with a preconceived political agenda.

The CFPB’s website prominently solicits complaints from citizens regarding consumer financial companies’ practices, and it claims to receive about 25,000 complaints about financial products and services each week. The CFPB’s report regarding credit card rewards card programs was based on only 1,200 total complaints--.09 percent of the total number--suggests this is not a large problem. The report does not even fully analyze the entire sample of complaints--it selected a few hundred of those complaints to identify four recurring themes. How was this subset selected--are we to believe it was random rather than selected to align with the intended theme of the report? 

If the CFPB truly wants to provide a useful description of the credit card market it should carefully categorize and analyze the subjects of the entire 1.3 million complaints, publish a report of those results, and focus its enforcement and regulatory efforts on what those reveal instead of publishing a specious research report based on flimsy data to cast deceptive aspersions on the entire credit card industry. 

Fully 82 percent of adults have a credit card, which equates to roughly 262 million Americans, and over four-fifths of these have a rewards card. Consumers seem to be happy with the benefits they enjoy. Before the CFPB embarks on an expedition to intervene in the credit card marketplace it should conduct credible research based on large random surveys of all cardholders and ask unbiased questions that will objectively reveal both the benefits as well as the possible failures of this market. This report constitutes nothing of the sort.

Ike Brannon is a senior fellow at the Jack Kemp Foundation. 

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