April 20, 2024

CFPB Report Highlights Consumer Frustrations with Credit Card Rewards Programs

The recent report issued by the Consumer Financial Protection Bureau (CFPB) has shed light on the numerous difficulties consumers face with credit card rewards programs. Consumers report losing benefits due to devaluation, limited redemption opportunities, and vague or hidden terms and conditions.

Consumer-reported issues include reward devaluation or denial even after meeting program terms. Credit card companies focus their marketing efforts on rewards such as cash back and travel, rather than on low interest rates and fees. This often results in consumers with revolving balances paying far more in interest and fees than they receive in rewards.

The report highlights how credit card companies often use rewards programs as a "bait and switch" strategy by burying terms in vague language or fine print and changing the value of rewards after enrollment. Additionally, the proliferation of co-brand credit cards and rewards programs has created new problems where consumers can transfer miles or points to merchants.

Rohit Chopra, Director of the CFPB, stated: "Credit card companies promise upfront benefits for signing up and using their rewards card, but often bury complex terms in the fine print for using the rewards. The CFPB will be looking for ways to protect people's points, stop bait-and-switch scams, and promote a fair and competitive market for credit card rewards."

Credit card rewards programs have become increasingly complex in recent years. Especially for credit cards with high annual fees, a significant part of attracting consumer interest comes from benefits such as airline miles or hotel points and access to exclusive lounges and loyalty status.

The CFPB has received a growing number of complaints about how these rewards programs are administered. Consumers have encountered numerous issues in using these programs, including:

• Credit card issuers imposing vague or hidden conditions that prevent consumers from receiving rewards.
• Reward devaluation by issuers and merchant partners.
• Redemption issues with earned benefits.
• Revocation of previously earned rewards.

Federal consumer protection laws apply to rewards programs offered in connection with consumer financial products or services. The CFPB has taken action against credit card issuers such as American Express and Bank of America for engaging in unfair, deceptive, or abusive acts or practices related to rewards programs. The CFPB will continue to monitor credit card rewards programs and take necessary action on these issues as appropriate.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).