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Per Bloomberg, the CFPB will begin examining credit card issuers’ rewards programs. The Bloomberg Article quotes an email from Director Cordray stating that rewards programs can involve “detailed and confusing rules” and that the CFPB “will be reviewing whether rewards disclosures are being made in a clear and transparent manner, and we will consider whether additional protections are needed.”


Though there has not been significant consumer complaints related to rewards programs, the CFPB identified them as a subject of interest in its CARD Act report, noting that confusing disclosure practices pose risks to consumers and may warrant further scrutiny by the Bureau.  Citing an unnamed source, Bloomberg asserts that the "inquiry involves the marketing of rewards programs, particularly the marquee promise of a given card, such as cash back, or redeemable airline miles, and what a customer needs to do to get it."  As Bloomberg notes through a quote from Jim Miller, senior director of banking services at J.D. Power & Associates:  “Rewards are the No. 1 reason why customers select the card, and there’s almost a battle to provide the highest rewards.”

 

Per Bloomberg, the scope of the targeted examinations will include the time required to redeem rewards, the conditions placed on redeeming rewards, whether increased spending is required to redeem an award, and forfeiture policies of specific programs.

 

As with most thing CFPB related, it is likely that this inquiry will not simply implicate financial insitutions and company rewards programs; the CFPB will likely extend its inquiry to third-parties involved with the establishment, maintenance, and operation of such programs.

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