September 29, 2014
A partner with BuckleySandler LLP, Manley Williams has composed what may be the first article to consider consumer-rewards programs and the Consumer Financial Protect Bureau’s plans to regulate the burgeoning industry. Williams, a former staff attorney in the Federal Reserve Board’s division of consumer and community affairs, notes by way of introduction that the industry has waxed huge over the past 30 years.
“Loyalty and rewards programs are ubiquitous,” Williams explains. “Credit card issuers, hotels, airlines, and retailers offer loyalty, reward, or ‘frequent buyer’ programs to attract new customers and do more business with existing customers.”
According to Williams, the consumer financial services sector generates rewards valued at $180 billion per year, followed by the hospitality industry at $17 billion per year, and retailers at $12 billion a year. Yet, despite its size and complexity, the rewards market is subject to virtually no federal oversight.
But all that may change, Williams observes.
The CFPB’s 2013 CARD Act Report identifies rewards as an “area of concern,” Williams says. The Bureau is already conducting “market monitoring” to learn more about loyalty program terms and conditions.
“In sum,” Williams writes, “the CFPB may be ready to aim its regulatory headlights on loyalty and points programs in one or more of these areas: clear and robust disclosures, complex or misunderstood terms, changed terms after enrollment, unrealistic promises of rewards, unredeemed points and points forfeitures, fair access to awards, privacy of account information, transfers of points at death, or frequency of customer complaints.”
Manley Williams advises credit-card issuers, prepaid card issuers, and other payment systems participants in the retail financial industry on consumer protection laws, litigation, and risk-mitigation strategies. She prepares solicitation, disclosure, customer, and privacy agreements for issuers and merchants and advises on the purchase and sale of credit-card portfolios, and conducts training for in-house counsel on legal and compliance developments in the credit-card industry, including the CARD Act.