New U.S. legislation could upend credit card loyalty programs: The Points Guy founder calls the reckoning un-American

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Good morning. Americans love their loyalty points. Almost three-quarters of them use a credit card that lets them earn rewards. And the income generated from issuing those points is critically important to many players in the Fortune 500, especially airlines, hotels, and merchants. Delta Air Lines alone reported a 6% increase in loyalty revenue last year, with co-brand income from Amex up 11% to $8.2 billion. 

U.S. companies are expected to issue or redeem about $26 billion in points for customers this year. That doesn’t include the hundreds of billions of dollars in uncashed points that keep people tethered to their loyalty programs, despite devaluations, or perks that are hard to redeem. Along with generating revenue, those programs generate data that lets companies recognize and engage their most valuable customers. That might soon change.

Get ready for a raft of legislation that could cut points and consumers’ ability to accrue them. Lawmakers have reintroduced the Credit Card Competition Act, which forces issuers to put two unaffiliated networks on each card, allowing merchants to pick the cheaper one at the point of sale. And last week a federal judge upheld an Illinois state law, the Interchange Fee Prohibition Act, which bans swipe fees on taxes and tips, which could lead to higher card fees and reduced rewards. Other states are also targeting so-called interchange fees.

Although intended to lower fees for merchants and customers, this push threatens a form of currency that consumers like me really value. It also impacts the business models of airlines and other companies that rely on points. For a perspective from the front lines, I checked in with Brian Kelly, founder of The Points Guy. Along with building a travel and lifestyle platform that helps people navigate points, Kelly is a powerful advocate for improving the loyalty economy. 

“There is an existential crisis happening around the rewards and credit card space,” Kelly told me last week. “I don’t think enough people realize the ramifications of these laws.”

He’s right: If retailers can choose which network to use for transactions, they’ll naturally pick one with lower swipe fees than the 2-3.5% that credit cards often charge. For consumers, that could mean fewer points and possibly fewer of the fraud protections or other perks that those fees help sustain. The Illinois ban on fees for taxes and tips adds another layer of friction. 

These are complex laws that aim to achieve a multiplicity of goals. Kudos to New York for making it harder to devalue points without warning. But taking aim at fees also threatens the ecosystems they’ve created. Kelly even calls it un-American: “We’re going to allow a retailer to decide how a customer pays for a purchase with their own money? If retailers want people to use their debit card, then they should incentivize it.” And companies that want to retain the loyalty of their best customers may need to get more creative than relying on credit-card spending to boost their coffers.

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

This story was originally featured on Fortune.com