Wednesday, 27 March 2024 17:04

Loyalty programs and "buy now, pay later" under scrutiny

Oversight of credit card rewards programs pixabay

The U.S. Consumer Financial Protection Bureau (CFPB) has decided to intensify oversight of credit card reward programs and companies offering "buy now, pay later" services, in response to a growing wave of complaints from consumers.The U.S. Consumer Financial Protection Bureau (CFPB) has decided to intensify oversight of credit card reward programs and companies offering "buy now, pay later" services, in response to a growing wave of complaints from consumers.

Credit card loyalty programs targeted

Rohit Chopra, director of the CFPB, announced that the institution will focus on loyalty programs offered by credit cards. This decision is a response to numerous consumer complaints about the complexity and potential opacity of these program conditions. Chopra emphasized that banks sometimes hide the "dark side" of their offers, including the possibility of revoking rewards or making them difficult to redeem.

"Buy now, pay later" - will new regulations come?

The CFPB also does not overlook the dynamically developing BNPL (Buy Now, Pay Later) industry, which allows consumers to defer payments for purchases. Due to the lack of BNPL transaction data in credit reports, lenders may not have a full picture of a consumer's creditworthiness. Chopra expressed concerns about the evolution of BNPL services, which are increasingly offered through sellers' own apps, using extensive personal data to encourage larger purchases and loans.

Responsibility and transparency

Founded after the financial crisis in 2008, the CFPB is tasked with protecting consumers from unfair practices in the financial sector. Under Chopra's leadership, the agency has adopted a broad approach to its mission, also targeting large technology companies offering payment services. Increased oversight of loyalty programs and BNPL services may bring greater transparency and fairness for consumers, reducing potential financial risk.These actions aim not only to protect consumers but also to promote healthy competition and innovation in the financial industry.

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