Bilt Users Revolt Over Rocky Transition
OIG Report on Pulaski, CCCA Resurfaces, Revolut Files for U.S. Charter, Kraken Gets "Skinny" Master Account
Hey all, Jason here.
I had a lovely week or so at the beach here in Mexico, before taking a two-day road trip back to Mexico City. Looking forward to spending some additional time in and around the area, before returning home to the Netherlands.
Sadly, I won’t be making it to spring conferences like Fintech Meetup this year, so, if you were hoping to catch up with me there, feel free to drop me a line, and we can find a time to chat.
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Bilt Users Revolt Over Rocky Transition
The economic viability of offering credit card-style rewards on rent payments was always, to put it charitably, dubious.
The rich incentives offered by popular rewards cards like Chase’s Sapphire Reserve and American Express’ Platinum card are funded largely from interchange, which, in turn is passed along as the largest component of the “swipe fee” that merchants pay to accept card payments (yes, there is an argument that interest paid by those who revolve card balances also helps fund rewards programs in card portfolios where many high spenders don’t carry a balance.)
While the interchange rate and, by extension, the merchant discount rate vary by the type of card used, the average rate is around 2.5% to 3%, and many merchants pay a “blended” rate, where the cost of accepting any card is charged at the same rate. For example, Stripe’s standard pricing for card-not-present transactions in the U.S. is 2.9% plus $0.30, regardless of the type of card used.
These rates are substantially higher in the U.S. than most all other markets and have been a perennial point of friction between merchants, networks (Visa, Mastercard, Amex), and card issuers.
While most all day-to-day merchants grudgingly accept these fees as a cost of doing business, some, particularly those consumers can’t easily choose an alternative to, often require or incentivize consumers to make payment using a less expensive method. Types of merchants in this category include lenders, utility companies, and landlords and mortgage services.
These billers might accept card payments, but with a surcharge or “convenience fee” that covers (or more than covers) the merchant discount rate.
A typical consumer unfamiliar with the nuance and complexity of the U.S. payments reasonably might wonder, why can’t I pay my rent with my credit card to earn points?
Offering rewards points on rent and, with the launch of it’s “2.0” offering, on mortgage payments is the alchemy Bilt offers consumers.
Bilt launched in 2021, originally partnering with Evolve Bank & Trust (yes, that Evolve.)
But Bilt, quickly growing thanks to its unique offering of points on rent, landed a $60 million growth round announced in September 2021, including investment from Wells Fargo. Bilt transitioned bank partners and officially began issuing cards via its relationship with Wells Fargo in March 2022.
But, according to extensive reporting on Bilt’s relationship with Wells Fargo, economic assumptions the bank made when agreeing to partner with Bilt were fatally flawed. Reporting from the Wall Street Journal in 2024 revealed:
Wells Fargo assumed 65% of Bilt card spend would be non-rent, but, in reality, only about 35% was;
The bank believed that cardholders would revolve between 50% to 75% of card spend, but only revolved around 15% to 25%;
Wells Fargo viewed the program as an opportunity to cross-sell mortgage to Bilt cardholders, who tend to skew higher-income;
The Bilt program experienced abnormally high fraud losses, due to errors in how card numbers and expiration dates were generated;
How Bilt facilitated rent payments posed money laundering risks that needed to be remediated;
Wells Fargo paid Bilt $200 for each new card account and, about six months after the launch of the partnership, the bank began paying Bilt about 0.80% of each rent payment, even though Wells Fargo wasn’t earning interchange payments on these transactions.
The upshot was, according to the Journal, that Wells Fargo was losing as much as $10 million per month on the program.
While the partnership between Bilt and Wells Fargo was originally supposed to continue until at least 2029, in July 2025, the bank announced the partnership would wind down early, with Wells Fargo-issued Bilt cards sunsetting on February 6th, 2026.
Faced with the loss of the bank partner issuing its cards — and, implicitly, subsidizing the rich rewards it offers — Bilt announced a slate of new cards with new benefits, dubbing it “Bilt 2.0.”
The new cards, powered by issuer-processor Cardless and sponsor bank Column, include the no-annual-fee Bilt Blue Card, the $95 per year Obsidian Card, and the $495 per year Palladium Card.
According to the company, all earn 4% back in “Bilt Cash,” let cardholders make rent and mortgage payments with no transaction fee, and offer an introductory 10% APR for the first year on new eligible purchases.
Bilt also promised existing cardholders a “seamless” transition from their existing Wells Fargo-issued cards to the new Bilt 2.0 cards issued by Column.
According to the company’s documentation, if users chose a new Bilt card by February 1, 2026:
they would keep their existing card number, and, if they used Apple Pay or Google Pay, details would update automatically;
users would not see a hard inquiry on their credit report tied to the new card/credit line, though the new card would begin reporting as a new tradeline;
users might get the option to transfer any outstanding from their Wells Fargo card to their new Column-issued card, with Bilt working with Wells Fargo to close the old account.
Bilt users who chose to keep their existing Wells Fargo account open would receive a new Wells Fargo Autograph card and could continue to manage any outstanding balance via the banks website and app.
Users who had an outstanding balance at Wells Fargo, didn’t have the balance ported to their new Bilt card, and didn’t opt to receive a Wells Fargo Autograph card could only manage that balance through Bilt until February 6th. After this date, according to Bilt’s site, users would need to “make payments directly to Wells Fargo by calling 1-833-404-2272 or visiting wellsfargo.com.”
How cardholders’ rent payments are handled under Bilt’s new approach also changed significantly.
In Bilt’s original incarnation with Wells Fargo, rent payments were charged against a user’s credit line, giving them a month of float to choose when to pay down the charge. While many users opted to pay down their rent charge more or less immediately, others used the flexibility to effectively split their rent into multiple payments.
Bilt Users’ Housing Payments Pooled in FBOs At Column, Evolve Bank & Trust, According to Company’s Terms and Conditions
As anyone who has managed transitioning a card program from one bank sponsor/issuer processor to another knows, it is an extremely complicated affair. This is even more the case for credit vs. debit cards, where cardholders may have outstanding balances and more regulations, like the CARD Act and the Truth in Lending Act, apply.
While Bilt promised cardholders a seamless transition — and, for some, even many, it probably has been — users have flooded social media sites like X and Reddit with a litany of complaints, including:
Users who were declined for the new card or received a credit limit substantially lower than they had previously;
What users viewed as an excessively complicated rewards earning and redemption structure;
Users experiencing declined transactions and frozen cards, including during a promotional period when Bilt was offering a higher rate of points on certain transactions;
Users who claim outstanding balances were transferred from Wells Fargo to the new cards without their permission;
Users who complain they’ve experienced difficulties making payments on outstanding balances still held at Wells Fargo;
Users who claim they received a new Wells Fargo Autograph card they didn’t want or authorize;
Users who say older statements they needed for financial tracking/planning and tax prep disappeared from the Bilt app;
Users who believe they should have qualified for a special promotion offered if they signed up for Bilt 2.0 through a link on The Points Guy website, but didn’t;
Users who reported difficulty in linking bank accounts to Bilt;
Users who reported not receiving their physical Bilt card or receiving it with incorrect/incomplete details printed on the card;
and, perhaps the issue that has driven the most frustration and outrage, issues with rent and mortgage payments not being made, being delayed, or bouncing, with some users reporting their external bank account had been debited by Bilt, but the corresponding payment was never made to their landlord or mortgage servicer.
Adding insult to injury, users seeking customer support are primarily directed to an AI chatbot that, according to widespread social media complaints, is woefully lacking. Users seeking to connect with a human support agent are complaining of multi-day wait times or no response at all.
The new structure of how rent (and now, in Bilt 2.0, mortgage payments) are handled raised some eyebrows among those familiar with the consumer protection regulations that apply to credit cards, specifically, the CARD Act.
The CARD Act requires issuers to mail or deliver a statement at least 21 days before a cardholder’s payment due date. How can Bilt 2.0’s structure of more or less immediately debiting a user’s external bank account for a rent or mortgage payment be compatible with this requirement?
A look at Bilt’s terms and conditions offers some context. According to its terms, Bilt “may make available” a “payment account” to users, with two underlying banks providing such accounts: Column, the same bank that serves as Bilt’s card issuing partner, and Evolve Bank & Trust.
Instead of users’ rent being charged against their credit line and then repaid during a normal statement cycle, users appear to be moving funds to a transaction account established for their benefit — an FBO account — at either Column or Evolve.
Yes, per Bilt’s terms and conditions, it appears to be pooling users’ rent and mortgage payments at Column as well as at embattled Evolve Bank & Trust — the bank at the center of an ongoing battle over $95 million in missing customer deposits, that was hacked by a Russian cyberransom group, and whose bank holding company is behind on debt coupon payments because it is functionally insolvent.
While the use of this shadow “payment account” structure could, depending on the exact flow of funds, enable Bilt to process rent and mortgage payments without the transactions technically hitting a user’s credit line — thereby avoiding the consumer protections afforded by the CARD Act and TILA — such transactions still appear in a user’s list of transactions within the Bilt app.
And, for users opting to pay via Venmo, the way Venmo and Bilt display the transaction certainly make it appear like it is a credit card payment that Bilt is then immediately drawing repayment for from a user’s external linked bank account, potentially in violation of the CARD Act.
The use of this convoluted shadow “payment account” structure and, potentially, Evolve’s history of operational problems may help explain why some users are experiencing delayed, duplicate, or returned housing payments.
Asked about users’ numerous issues and complaints, a Bilt spokesperson said via email, “Our members are our number one priority — full stop. We are committed to delivering for them and will continue to work tirelessly to ensure we do.”
Everything Else: OIG Report On Pulaski Failure, CCCA Resurfaces, Revolut Seeks U.S. Banking Charter (For Real This Time), Kraken Gets Fed Master Account
Last week, the Office of the Inspector General of the FDIC released its in-depth review of the failure of Chicago-based Pulaski Savings Bank. The bank’s failure cost the deposit insurance fund approximately $28.5 million.
Pulaski failed due to impaired capital; specifically, because the bank had deposit liabilities of at least $20.7 million that were not properly recorded in its core banking system. Recognizing these previously unreported deposit liabilities that did not have corresponding assets caused the bank to become critically undercapitalized.
According to the OIG’s report, weaknesses in the bank’s management were known since at least 2017, at which time the FDIC established a memorandum of understanding with the bank in an attempt to remediate the management issues.
The MOU was updated in 2020 and 2023 to reflect the continued weakness in management at the bank and, in 2023, the FDIC downgraded the management component of the bank’s CAMELS rating to reflect key person risk.
The bank’s chief executive officer also served as its chief financial officer and chief credit officer. According to the OIG’s report, this one individual was responsible for:
Preparing financial statements;
Filing Call Reports;
Completing the credit loss analysis;
Preparing various board reports;
Ensuring internal audit concerns were addressed;
Administering commercial and problem loans;
Preparing board minutes;
Serving as investment officer; and
Conducting human resources administration.
Interesting, despite their far-reaching responsibilities, “FDIC examiners [the OIG] interviewed did not designate the CEO as a dominant official because they did not believe that the CEO had material influence over the bank’s operations.” Rather, the FDIC examiners recommended corrective actions related to key person risk, and, the OIG report notes that, according to FDIC personnel, “while the designation of the CEO as a dominant official was appropriate in hindsight, it would not have changed the FDIC’s supervisory actions, which included the supervisory actions taken with respect to the identification of key person risk.”
Ultimately, the OIG report makes no recommendations for changes based on how the FDIC supervised Pulaski, as the FDIC identified and sought to mitigate weaknesses in the bank’s management over a seven-year period.
Meanwhile, the Credit Card Competition Act has resurfaced — again. Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) are seeking to attach the measure, sometimes dubbed “Durbin 2.0,” to the bipartisan 21st Century ROAD to Housing Act.
The CCCA would required banks with more than $100 billion in assets to support two unaffiliated networks on credit cards they issue and prohibit routing restrictions. Supporters argue the measure would increase competition in payments processing, reducing merchants’ cost and resulting in savings for consumers. History, however, suggests any savings realized by merchants are unlikely to be passed along to everyday shoppers in the form of lower prices.
Elsewhere, more firms continue to file de novo charter applications. Revolut, which has publicly floated applying for a charter or acquiring a U.S. bank for years now, has finally actually pulled the trigger.
The company, which holds bank charters in the European Union (Lithuania) and Mexico, had long struggled to obtain a bank charter in the U.K., where it is headquartered, but ultimately was award one with restrictions in 2024. Revolut’s U.K. bank remains in the “mobilization” stage, which typically lasts around 12 months, limiting the bank to holding a maximum total of £50,000 in deposits.
In the U.S., Revolut filed an application with the Office of the Comptroller of the Currency to form Revolut Bank US, N.A., and a corresponding deposit insurance application with the FDIC.
Last but not least, crypto firm Kraken, a subsidiary of which is chartered as a Wyoming special-purpose depository institution (SPDI), has become the first digital asset company to gain access to a Fed master account.
While access to a master account is often positioned merely as access to the Federal Reserve’s “payment rails” — FedWire and FedACH — American Action Forum’s Thomas Kingsley argues that master account access goes to the heart of where the line is drawn on the “banking regulatory perimeter.”
The Fed has granted Kraken what is colloquially being referred to as a “skinny” master account, meaning access to some but not all of the privileges and features prudentially supervised insured depository institutions get.
But, Kingsely argues, the development “raises the policy question raised of whether public payments infrastructure can be partially opened to nonbank financial firms without, over time, extending the implicit protections and expectations of the federal safety net.”
Things To Know & Other Good Reads
Regulatory Capital: Interagency FAQs on Tokenized Securities (Office of the Comptroller of the Currency)
The Practice of U.S. Monetary Policy Independence from Martin to Greenspan (Fed Finance and Economics Discussion Series)
How Banks’ Technology Spending Affects Performance (Kansas City Fed)
Trump officially nominates Kevin Warsh as Fed chair to replace Jerome Powell (CNBC)
OCC Issues First Substantive Rulemaking Under the Genius Act (Manatt)
Visa and Bridge Expand Collaboration, with Plans to Bring Stablecoin-Linked Cards to Over 100 Countries (Visa Press Release)
Kraken and the Problem of Who Should Have Access to a Fed Master Account (American Action Forum)
Learning from Lloyd: Blankfein, Goldman and the Next Market Reckoning (Net Interest)
Can I Opt Out of the DIDMCA Debate? (Fintech Takes Banking)
Listen: Cash App Plans To Sell Proprietary Credit Scores To Others (Fintech Recap)
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