The Consumer Financial Protection Bureau and Department of Transportation today held a joint hearing on credit card and airline rewards programs, highlighting what both agencies characterized as the benefits of such programs, but also their alleged drawbacks for consumers and business competition. In his opening statement, Transportation Secretary Pete Buttigieg acknowledged that rewards programs can bring value to consumers, noting his family benefited from airline rewards as his father would use points accrued from work travel to make possible overseas family trips.
“But unlike the dollars in savings accounts, the value of points in miles is completely up to the companies that issue them,” Buttigieg said. “If a customer makes significant decisions that might include not just what airline to fly, but what credit card to use, and in doing so choose to pay a higher price than they would otherwise, it matters that the reward they get for that fee is as advertised. If the value of that reward turns out to be less than transparent, or is abruptly changed, that’s a concern.”
A panel of airline representatives and consumer advocates discussed what they viewed as the positives and negatives of rewards programs. While consumer advocates claimed that a lack of meaningful competition among airlines and card issuers is harming consumers, Scott DeAngelo, chief marketing officer for Allegiant Air, described how his company launched a co-branded credit card in 2016 that has won multiple consumer awards for perks such as priority boarding and five reward points for every dollar spent. “We’re constantly looking for ways to improve and expand the benefits,” he said.
ABA: Credit card rewards hearing puts politics over policy
The joint hearing on airline and credit card rewards programs was yet another example of the bureau putting politics over policy to the detriment of the consumers it is charged with protecting, American Bankers Association President and CEO Rob Nichols said. Noting that the hearing comes as large retailers are pushing for legislation that threatens to eliminate rewards programs—the Credit Card Competition Act—”we would hope the bureau and the DOT would be focused on preserving access to reward offerings rather than calling them into question,” he said.
“The credit card market in the U.S. is highly competitive, and consumers have hundreds of card issuers and thousands of card reward programs to choose from,” Nichols said, noting data from a recent Morning Consult survey. According to the survey, nine in 10 consumers (93%) said that they value the convenience of using their credit cards. Eight in 10 (80%) have at least one credit card that offers rewards, and 88% say they value the rewards program on their credit cards. By a more than 2-to-1 margin (63% vs. 24%), consumers say they would be disappointed to lose the rewards program on their credit cards due to government regulatory changes.
“If the bureau wants to truly help consumers, it should start by defending the credit card reward programs that Americans use every day to stretch their dollars and help make ends meet,” Nichols added.
