Officials say consumers may be paying more than the credit card perks are worth

Biden administration officials argue that credit card holders may pay more in fees and interest than travel rewards and other perks are worth, raising scrutiny of loyalty programs that make up the spending of millions of people.

The Consumer Financial Protection Bureau and the Department of Transportation held a joint hearing in Washington on Thursday that included representatives from airlines, financial institutions, unions and consumer advocacy groups to discuss whether new regulations are needed.

The organizers are Consider the promises made About sign-up bonuses, changes in point values, obstacles to redeeming points, and loss of bonuses when cards are closed. They particularly focus on travel rewards, such as those offered by airline-branded credit cards that allow users to earn frequent flyer miles. Forty-one percent of Americans They have travel rewards credit cards, according to a NerdWallet survey last year.

“We will look at how to make sure companies are clear about what people will get from frequent flyer miles or loyalty programs when they sign up, and whether people are actually getting the deal they are promised.” Secretary Pete Buttigieg said at Thursday's hearing.

The heightened scrutiny of credit card rewards is part of a broader White House crackdown on “junk fees” and other pricing practices, especially in industries like financial services. And airlinesWhich the administration believes puts unfair pressure on consumers and contributes to inflation.

In March, the CFPB reduced Late fees charged by credit card companies, prompting opposition from the industry. Two weeks ago, the Department of Transportation said it would require airlines to quickly return cash to travelers whose flights were canceled or seriously delayed.

The CFPB, which has jurisdiction over financial institutions, has cracked down on banks for credit card sign-up bonuses before. Last July, that Command Bank of America will pay more than $100 million for practices that include withholding or denying reward points to tens of thousands of consumers.

Federal regulators are now looking closely at airline credit cards as well. with Annual fees Up to $ 650 and average interest rates of 25.3 %, according to LendingTreecan be much more expensive than the average credit card, which in many cases has no annual fee and charges relatively lower rates, averaging 24.7%.

CFPB Director Rohit Chopra told NBC News before the hearing that federal authorities could consider regulations, or even enforcement actions, if they determine that companies are breaking their promises to consumers.

“We see that for many airline rewards programs, credit card companies charge huge interest rates, sometimes 30% or more. Many consumers actually lose out on these deals,” Chopra said. “They may be paying more than the value of their rewards.” on her”.

Even if consumers were able to pay their bills on time and avoid paying interest, consumers complained about restrictions on using the points they had accumulated.

Buttigieg told NBC News before Thursday's hearing that he had concerns about “sudden changes” in the value of points, given airlines' control over how many points a flight from, say, New York to Honolulu might cost.

Airlines for America, a coalition representing the nation's largest airlines, said Thursday that there is “fierce competition” within the industry for credit card loyalty, adding that “consumers have the power to choose when choosing an airline for air travel or a credit card for air travel.” . Spending, with a wide range of options, to choose what suits their needs.

The Electronic Payments Coalition, which represents credit unions, community banks and payment card networks, refers to the CFPB Data The value of reward points showed an increase from an average of 1.4 cents per dollar spent in 2019 to 1.6 cents in 2022. In a statement Thursday, the group announced described Regulators scrutinize credit card rewards as 'politically motivated'

Loyalty programs, which sell points back to consumers at prices they set, have been a huge source of revenue for major airlines.

Delta Airlines He said It generated $6.5 billion in revenue tied to its loyalty programs last year alone, and American Airlines He said 80% of its revenue this year will come from loyalty program members. When United Airlines pledged its entire loyalty program for a loan in 2020, it pledged value Assets worth $21.9 billion.

Lauren Randall, who lives in Norwalk, Connecticut, told NBC News that she recently applied for a travel credit card that offers 40,000 miles upon signing up, only to receive a promotion in the mail just hours later for the same card that offers 60,000 points. She said she called to see if she could get the better promotion but was turned down, calling it a “bait and switch.”

“It seems like every year, either the seats get smaller, the prices go up, or there's some kind of excuse,” Randall said. “It would be great to make these companies more accountable for their experience and what they promise.”