The Reward Cardholders’ Bill of Rights: Why issuers should hold these truths to be self-evident


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The Consumerism movement, which began in the 1950s as a reaction against predatory business practices, reached its zenith in 1962, when U.S. President John F. Kennedy gave a speech to Congress in which he outlined four basic rights to which all consumers were entitled. “If a consumer is offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and national interest suffers,” Kennedy said.

Those four rights, later expanded to six, became the foundation of the Consumer Bill of Rights, which was adopted as a United Nations resolution in 1985. The moral of this history lesson should be obvious: If businesses don’t police themselves, eventually the government will do it for them. Lobbyists can delay or water down regulations, but sooner or later consumer outrage aligns with the need for politicians to be reelected, and regulations with real teeth are enacted as law.

As credit card issuers prepare for the Credit CARD Act of 2009 to take effect in 2010, they would do well to keep this history lesson in mind. Newspapers and blogs are filled with tales of cold-hearted bankers raising interest rates, increasing fees, slashing credit limits and gutting reward programs. Are banks enacting these changes as a survival strategy against rising defaults, or because they really do enjoy treating their customers like piñatas? The answer is beside the point—in the press, all issuers are portrayed as moustache-twirling villains.

The problem with this portrayal is that, unless it changes, it might lead to even tougher regulations down the road. Want to know what the reward credit card landscape will look like if Congress forces a cap on interest or interchange fees? Visit Australia—the Reserve Bank of Australia (RBA) enforced interchange fee reductions in 2004, and the result, according to a 2007 MasterCard Worldwide Insights report, was that “rewards programs have been downsized, and in some instances very substantially…from the cardholder’s point of view, the net results of RBA regulation have been increased costs, reduced benefits and no savings.”

So how can issuers prevent a repeat of the Australian model here in the U.S.? I can’t speak directly to the broader question of how issuers balance profits against consumer perceptions. But as a loyalty marketer, I can speak to the importance of balancing reward program costs against the loyalty of your best customers. One way to strike that balance is to proactively adopt a pro-consumer stance. Declare to the world that you will protect and become sound financial partners of your reward cardholders. Taking a page from JFK, you might even proclaim a Reward Cardholders’ Bill of Rights, using the basic consumer rights that Kennedy articulated as your template. Were you to do so, it might look something like this:

The Reward Credit Cardholders’ Bill of Rights

* Right #1: The Right to Be Safe
When Kennedy articulated this basic consumer right, he was referring literally to the right not be killed or injured by the products we buy. For reward cardholders, this right refers to the fundamental right to privacy and data protection. Consumers must have full assurance that their credit card numbers, transactional information and personal details are secure from fraud and will not be subject to improper use by the issuer or program partners.
* Right #2: The Right to Choose Freely
This right was JFK’s warning against the rise of monopolies. For reward cardholders, this right assures consumers that issuers will not enact hidden or onerous fees or slash the value of reward programs secretively or arbitrarily, but rather will place such decisions squarely in the hands of their cardholders. Give your cardholders the choice of participating in a rich rewards program, provided that they’re willing to pay an annual fee or a (slightly) higher interest rate, or to opt out of rewards altogether in exchange for a no-fee card with a low annual rate. Give them the choice of reward model—cash back versus points and miles, for example—and price participation accordingly. Capital One has taken an early lead on this right with their Card Lab service; other issuers would do well to follow suit.
* Right #3: The Right to Be Heard
Kennedy believed that consumers had a right to have their concerns and complaints heard—and if the private sector won’t hear complaints, Kennedy warned, then the government will. Likewise, reward cardholders have a fundamental right to clear lines of communication with issuers to understand terms and conditions, earning options and data usage, and to understand to which communications streams they are opting in. Consumers should also expect that the purchases they make and the preferences they indicate will result in relevant, value-added offers and messages from issuers.
* Right #4: The Right to be Informed
When consumers purchase products and services, JFK argued, the onus is on the seller to clearly articulate contract and warranty terms, service fees and any changes to service agreements. Reward cardholders should expect the same rights when it comes to understanding any changes in program earning rates, expiry dates, redemption fees, etc. Reward cardholders can be surprisingly forgiving about program changes provided that they’re treated with respect. Issuers who approach program changes with full transparency will enjoy stronger cardholder relationships in the long run.
* Right #5: The Right to Education
This right was Kennedy’s admonition to businesses to help their customers make informed purchase decisions without being subject to misleading or deceptive sales practices. Fortunately for consumers, the wired marketplace now makes self-education a breeze. Any potential reward cardholder can easily compare your reward card’s value to competing card products with a few clicks of the mouse. But in today’s tough economy, consumers will also look for issuers who can help them make informed financial decisions about the types of rewards they can earn and the tradeoffs between revolving their balances versus paying them in full. Become a sound financial partner with your cardholders, and you’ll earn more than their loyalty—you’ll earn their trust.
* Right #6: The Right to Service
The right to good customer service seems so fundamental that it seems pointless even to articulate it—until you recall the dire state of customer service in the U.S. Reward cardholders have a fundamental right to choose their preferred channel of customer service and to receive prompt, courteous answers to their questions and complaints. If you tier your customer service benefits based on value—for example, driving all basic cardholders to your web site for service while providing a dedicated customer service line for Platinum members—then be certain that your cardholders understand how they can earn their way to premium service levels.

American consumers have a love-hate relationship with the credit card industry. The good news: An August 2008 poll sponsored by found that 82 percent of Americans believe that credit cards provide a valuable service. The bad news: 73 percent of those same Americans believe that the government should regulate the credit card industry more closely. The lesson: Your cardholders want to love you, but like battered spouses, their love is subsumed by fear and mistrust. Rewards credit card issuers can’t repair the damaged relationship with their cardholders overnight. But by adopting this Reward Cardholders’ Bill of Rights and making it the centerpiece of your marketing efforts, you can certainly extend the first olive branch. After all, Kennedy was only articulating what all of us know in our hearts to be true.


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