By Thomas Rosenkoetter
ABA Viewpoint
In recent months, the Consumer Financial Protection Bureau has intensified its focus on the credit card market and rewards programs. The bureau’s latest volley is a report titled “Credit Card Rewards,” which is based on consumer complaints submitted to the bureau and whose release coincided with a joint CFPB and Department of Transportation public hearing on airline and credit card rewards programs.
In its report, the bureau argues that consumer complaints reveal “concerning patterns” regarding market practices, warns issuers to “ensure their conduct . . . conforms with the law” and promises to “take necessary action on these issues where appropriate.” While these statements might grab headlines, they are not supported by the data. Instead, the report is another example of biased research based on a flawed methodology and designed to support a predetermined and politically motivated conclusion. Similar to previous CFPB analyses that ABA has rebutted on interest rates spreads and industry competitiveness, the bureau’s conclusions on card rewards do not stand up to scrutiny.
Americans like their credit cards — and they like their rewards
Let’s start with the fact that Americans like their rewards. According to a March survey conducted by Morning Consult on behalf of the American Bankers Association, more than nine in 10 consumers (93 percent) said that they value the convenience of using their credit cards. Eight in 10 have at least one credit card that offers rewards, and 88 percent say they value the rewards programs on their credit cards. Furthermore, by a more than two-to-one margin (63 percent versus 24 percent), consumers say they would be disappointed to lose the rewards program on their credit cards due to government regulatory changes.
Complaints about rewards are exceedingly rare
The evidence is also clear that consumer complaints are exceedingly rare. The bureau reports that it received more than 1,200 consumer complaints related to credit card rewards in 2023, but as illustrated below, it fails to note that these complaints comprise a very small fraction of all complaints it receives — and an even smaller fraction of the credit card market.
In 2023, consumers submitted roughly 1.3 million complaints to CFPB, of which only 4.2 percent (54,416) were about credit cards. Of these, only 2.2 percent (1,215) pertain to rewards. Overall, complaints about credit card rewards comprise 0.09% of all complaints submitted. Relative to the 143 million U.S. adults who own a rewards credit card, the probability that a rewards cardholder selected at random submitted a complaint about rewards in 2023 is 0.0008 percent — hardly evidence of a malfunctioning marketplace.
Still, even though complaints about rewards credit cards are rare, credit card issuers take these complaints seriously, as evidenced by the industry’s 99.2 percent timely response rate to complaints in the database. In fact, more than one-third of credit card complaints submitted to the bureau resulted in some form of monetary or non-monetary relief from the card issuer, according to the bureau’s complaints database.
Opaque methods, scant evidence, and key omissions
The bureau’s research and accompanying rhetoric on credit card rewards programs in recent months appear to be designed to justify increased legal or regulatory scrutiny of industry practices. Given the importance of the credit card industry to the U.S. economy, not to mention the popularity and ubiquity of credit card rewards programs with U.S. consumers, it is critical that the CFPB employ rigorous and transparent methodologies to ensure its findings are credible.
Unfortunately, the bureau’s report includes no methodological detail beyond a single sentence: “We analyzed several hundred consumer complaints relating to the administration of credit card rewards programs and identified four recurring themes that resulted in consumers not receiving the rewards they were promised.” The report does not indicate how many complaints were reviewed, how they were selected, what — if any — efforts the agency undertook to assess their veracity, or what share of the reviewed complaints fell into each “recurring theme.” As a result, the reliability of the bureau’s analysis is impossible to verify.
Further, with the limited detail offered in the report, there is no way to determine whether the 39 specific complaints referenced in the report are representative of the overall complaints database or cherry-picked to support a pre-determined narrative. For example, in one section titled “Bait-and-Switch Offers,” the CFPB report states that “consumers described applying for a card based on a more rewarding offer but later receiving an inferior promotion.” However, to support this assertion, the report cites just two complaints, both of which received a timely response from the credit card issuer and were “closed with explanation.”
The bureau also omits key details that provide important context for the complaints it cites. For example:
- More than one-third of the complaints cited in the report resulted in the issuers offering monetary or non-monetary compensation to the cardholder. The fact that issuers voluntarily resolved these complaints in the cardholder’s favor is a relevant detail included in the complaints database but nonetheless omitted from the report.
- The CFPB also appears to intentionally disguise the timing of the referenced complaints. On the first page of the report, the authors reference the roughly 1,200 rewards complaints submitted in 2023, and in the next paragraph they note that they analyzed “several hundred complaints relating to . . . credit card rewards programs.” Although it would be reasonable to conclude from these statements that the bureau focused its analysis on complaints filed last year, this is actually not the case: of the 39 complaints cited as evidence for the bureau’s conclusions, only 11 were submitted last year. In some cases, the complaints referenced to as evidence are quite dated: for example, the complaints cited by the CFPB on the use of “hidden or vague conditions” to deny promotional offers were submitted in late 2016 or early 2017.
- Finally, by taking submitted complaints at face value and drawing wide-ranging conclusions from them, the bureau appears to disregard its own guidance on how to use (and not use) the database. Specifically, the database includes a disclaimer that the bureau “does not adopt their views [of the complainant] or verify that their experiences are accurate or unbiased” (emphasis added) and advises the public to “consider what conclusions may be fairly drawn from reading consumers descriptions of their experiences.”
These are important caveats that are not mentioned in the report.
Conclusion
In closing, the bureau’s research methods are not transparent, and the sweeping conclusions it draws regarding “unfair, deceptive and abusive practices” in the credit card market based on the unverified complaints of an extremely small number of cardholders — many of which were addressed voluntarily by the issuers — is meritless. The latest report is yet another example of the bureau working backward from a predetermined conclusion that credit card rewards programs are bad for consumers and need to be reformed, despite widespread evidence that these programs are highly popular and deliver tremendous value to tens of millions of cardholders from all walks of life. The credit card industry and the millions of customers we serve deserve better.
The facts are clear: Americans like their credit cards. They like their rewards. They would be disappointed to lose their rewards programs. The complaints about rewards are exceedingly rare. When they do occur, banks take them seriously and resolve them quickly.
Thomas Rosenkoetter is executive director of ABA’s Card Policy Council.
