Credit card and airline rewards are incredibly popular among Americans, but Biden administration officials worry aggressive marketing practices and the dominance of large players in the industry may be harming competition and consumers.

The Consumer Financial Protection Bureau (CFPB) and the Department of Transportation questioned industry executives and consumer advocates during a joint hearing Thursday on the impact of and issues facing these rewards programs, which Transportation Secretary Pete Buttigieg called an “important part of our savings.”

There are around 550 million credit cards in circulation in the U.S., and “credit card rewards take center stage in the industry’s marketing blitzes,” CFPB Director Rohit Chopra said during his opening remarks.

Airlines and credit card companies encourage customers to sign up for cards by dangling large points packages for new sign-ups, which can add up to hundreds of dollars, as well as other perks including airport lounge access. 

But Chopra said the agency’s initial review of “all the fine print” found issuers can “quickly and dramatically devalue those points” by making it more difficult to redeem points, limiting redemption options and inflating the point price for goods and services.

Buttigieg asked why a $9 sandwich on a flight would cost 1,100 miles, or roughly $11, after Scott DeAngelo, executive vice president and chief marketing officer at Allegiant Air, said one point is one penny during his opening remarks.

While the largest U.S. banks paid $68 billion in credit card rewards in 2022, credit card issuers collected a record $130 billion in interest and fees, according to a CFPB report released last fall. The report highlighted the danger of consumers choosing cards with higher annual percentage rates (APRs) for the points and perks alone who then end up carrying a balance.

With total credit card debt at an all-time high — topping $1.1 trillion at the end of last year — Chopra said there was good reason to question issuers’ heavy focus “on ways to entice customers using features other than the real cost of credit, the interest rate and fees they charge.”

“Since these programs by design often can encourage a customer to not choose the product with the lowest price, whether that price is the airfare for a ticket or the annual fee and APR for a credit card, we want to make sure we understand the impact that rewards programs have on competition and market behavior,” Buttigieg said.

The hearing is the latest installment in the Biden administration’s battle against junk fees, the hidden costs or unexpected fees that critics say add up and obscure the true cost of a good or service. 

The CFPB and other agencies have ramped up efforts to crack down on junk fees, which has been met by resistance from the business community. The U.S. Chamber of Commerce and other business groups sued to block a CFPB rule to cap credit card late fees at $8.

Notably absent from the hearing were the executives from the biggest players in the airline and credit card industries, including Visa, Mastercard, United Airlines and American Airlines, who refused to testify before the Senate Judiciary Committee about credit card competition last month.

Visa, Mastercard and the advocacy group Electronic Payments Coalition (EPC) are waging an all-out war with retailers and Senate Judiciary Committee Chair Dick Durbin (D-Ill.) over the senator’s Credit Card Competition Act.

The bill would require the biggest financial institutions — those with more than $100 billion in assets — to offer at least two network options to process credit card transactions.

At least one of those network options cannot be Visa or Mastercard, which currently control a combined 80 percent of the credit card interchange market in the U.S., hence the high-stakes lobbying battle.

The industry has said that if the bill passes, it will wipe away funding for credit card rewards programs. Nick Simpson, managing director of communications and public affairs at the EPC, urged lawmakers during the public portion of the hearing to oppose the Credit Card Competition Act.

“Regulatory and legislative threats like the Durbin-Marshall bill will jeopardize these programs, and if they were to be eliminated, small businesses would see fewer customers and tourism-heavy municipalities will see less tax revenue,” Simpson said.

Speaking from the Senate floor Wednesday, Sen. Roger Marshall (R-Kan.), who co-sponsored the bill with Durbin, decried the “the Visa-MasterCard duopoly [that] has used money and influence in Washington to turn politicians’ eyes away from predatory swipe fees.”

“I never could have imagined the uphill battle we’d face up here to do the right thing for doing what’s best for hardworking Americans who are living paycheck to paycheck,” Marshall said.