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Editor's Pick

CFPB Targets Currency Devaluations, Just Not Government-Caused Devaluations

Nicholas Anthony

Credit Cards

For as long as governments have meddled with money, currency devaluations have been a phenomenon. Whether it be by debasing the purity of gold coins, running up the printing press, or just adding a few zeros to the end of the ledger, governments around the world have often abused the privileges that come with having a monopoly on the money supply.

With that in mind, it was quite a surprise to see Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra had spoken out against “currency devaluations.” For a moment, it had seemed that the CFPB director had taken a break from the Biden administration’s “war on junk fees” to speak out against how governments themselves have harmed consumers.

However, upon further review, that’s not at all what the CFPB director had in mind.

Currency Devaluations, Just Not Those Currency Devaluations

Rather than share concerns about the countless people who have suffered as governments have mismanaged money, Director Chopra’s concern was with the devaluation of credit card reward points.

“When Americans sign up for rewards credit cards, they intuitively assign a monetary value to those points that makes signing up and spending worthwhile,” Director Chopra said. “However, our initial review of all the fine print suggests that credit card companies and airlines have the power to quickly and dramatically devalue those points.” In other words, Director Chopra is concerned because prices have been changing during a period of high inflation.

Chopra then went on to share concerns about wholesale pricing. “We have also observed that airlines sell points to consumers at inflated rates while selling those same points to credit card issuers at a much lower price,” he added. “This not only creates confusion about the true value of the points but also raises questions about fairness.”

Anyone who has operated a business (or shopped at Costco) likely recognizes what’s happening in the described situation. Credit card issuers are likely buying points in far greater quantities and at far more consistent intervals than the average consumer. As such, they are receiving better prices.

Conclusion

Unfortunately, basic economics is often missing from economic policies, and that has been particularly the case with the Biden administration’s war on junk fees.

Are you interested in learning more about price controls and other government interventions in the market? Ryan Bourne’s new book, The War on Prices, is out now.

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