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Consumer Watchdog Cracks Down on Credit Card Rewards Devaluation

The U.S. Consumer Financial Protection Bureau (CFPB) has issued a stern warning to credit card companies: devaluing or canceling rewards points, cash back, or miles without a valid reason may be illegal. In a recent policy circular, the agency emphasized that such practices could be deemed unfair, deceptive, or abusive, and may result in penalties for card issuers.

Rewards Cards Under Scrutiny

As of 2022, a staggering three-quarters of all general-purpose credit cards offer rewards, making them a major draw for consumers. Cardholders often choose which cards to apply for and use based on the rewards offered. However, the CFPB is concerned that some card issuers may be exploiting loopholes, such as fine print or technical glitches, to slash the value of these rewards.

Industry Pushback

Industry groups have responded negatively to the CFPB’s warning, accusing the agency of seeking headlines and tarnishing a popular product. Rob Nichols, president of the American Bankers Association, argued that complaints about credit card rewards are extremely rare and that the CFPB is exerting political pressure on card issuers.

Regulatory Uncertainty Ahead

The CFPB’s move comes at a time of regulatory uncertainty. With President-elect Donald Trump set to take office, observers predict a significant shift in the agency’s approach to enforcement and regulation. Trump ally Elon Musk has even called for the abolition of the CFPB. Meanwhile, Republican lawmakers are demanding that financial regulators halt new regulations until Trump takes office, a call the CFPB has thus far ignored.

Protecting Consumer Interests

The CFPB’s policy circular serves as a reminder that consumer protection is a top priority. By cracking down on unfair practices, the agency aims to ensure that credit card companies are held accountable for their actions. As the credit card landscape continues to evolve, one thing is clear: consumers deserve transparency and fairness when it comes to their hard-earned rewards.