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Consumer Financial Protection Bureau to Start Monitoring Credit Card Rewards Program Language

October 28, 2013

One of the nation's leading consumer protection agencies is planning to review the policies of credit card rewards programs, a move that should encourage loyalty operators to enforce clarity in all offer communications.

The announcement comes from a report released Oct. 2, just one day after the U.S. government shutdown, by the Consumer Financial Protection Bureau (CFPB), about the results of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). The CARD Act was intended to establish fair and transparent practices in the credit card market to protect the more than 70% of the U.S. population who have credit cards.

CFPB's report found that the total cost of credit declined by 2% from 2008 to 2012 as a result of the CARD Act. In addition, it revealed the CFPB's intent to review credit card rewards program language.

“Many consumers are picking their credit cards based on rewards programs,” said Richard Cordray, CFPB director, at a CARD Act Field Hearing on Oct. 2. “These offers, however, can be highly complex, as consumers may face detailed and confusing rules about how they can actually use their rewards.”

The CFPB now plans to review whether credit card rewards disclosures are being made in a clear and transparent manner. According to the report, the Bureau will also determine whether additional action is warranted.

Large copy and the Schumer Box

CFPB's announcement presents a challenge, but also an opportunity, for loyalty card operators.

A recent study by J.D. Power found that 33% of credit-card holders are unaware of the benefits associated with their rewards card.

"Customers who use their card's benefits spend an average of $400 more per month on their card, compared with those who are aware of benefits but do not use them," said Jim Miller, senior director of banking services at J.D. Power, in a press release.

"There is a clear opportunity for issuers to better communicate rewards programs and benefits to not only keep customers loyal, but also to attract new customers," Miller said.

Since the CARD Act, many credit card issuers have already simplified their overall cardholder agreements, with the average word count of such agreements falling nearly 25% from 2008 to 2012 (from 8,632 to 6,522 words).

It is unclear if the CFPB would impose word count restrictions on credit card rewards program print, as officials from the Bureau declined to comment.

But the CFPB could require companies to standardize rewards program language and may also impose certain guidelines on placement of disclosures, said Ben Woosley, director of marketing and consumer research at

Companies might also need to adhere to a certain size type and sequence, similar to that of the “Schumer Box,” Woosley said. The Schumer Box, named for the New York Congressman responsible for legislation requiring credit card term standardization, is an easy-to-read table that discloses the rates, fee, terms and conditions of a credit card agreement. The Schumer Box requires credit card companies to print long-term rate information in 18-point type or greater and remaining terms in at least 12-point type, according to

Credit card issuers should also pay particular attention to their redemption processes and demonstrate how customers can redeem rewards prior to signing up for such programs, Woosley said. “The redemption process is typically opaque until you join the program.”

Making the program stand apart

Woosley offers some overall best practices for companies running credit card rewards programs.

  • Keep it simple.Customers need to clearly understand how the program can benefit them. In terms of the earning structure, companies should keep it simple but rich enough so it's worth the customer's time.
  • Meet minimum rewards thresholds. For points and miles, it's important to be at one point per dollar spent – the standard for most programs. In general, rewards equate to being worth one penny.
  • Offer strong sign-up incentives. A free T-shirt upon signing up is not going to cut it. Today's savvy customers are looking for that extra benefit such as the ability to earn extra when flying thanks to special co-branded partnerships.
  • Provide anniversary recognition. Companies should make a point of rewarding customers each year with benefits such as a free night's stay. For programs with annual fees involved it can be a cost-effective promotion because it helps customers reconcile the expense.