On May 9, 2024, the CFPB issued a new report finding consumers encounter numerous problems with credit card rewards programs. In particular, consumers report losing benefits to devaluation, limited redemption opportunities, and vague or hidden terms and conditions.
CFPB Director Rohit Chopra said the following in a statement:
“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 more complex in recent years. Cards with high fees offer perks like airline miles, hotel points, exclusive lounges, and premium service to attract users. Sign-up bonuses are a big part of this, with nearly 1 in 10 reward dollars coming from these offers. However, the CFPB has received a growing number of complaints on how these rewards programs have been administered.
In its latest Issue Spotlight, the CFPB the following concerns in these credit card rewards program:
Credit card issuers impose vague or hidden conditions that keep consumers from receiving rewards. Consumers say terms and conditions of rewards programs don't match ads, making sign-up offers misleading.
Companies devalue rewards. Consumers say credit card companies and stores make it harder to use rewards by raising the points or miles needed for redemption. Consumers notice card companies don't shield them from partners changing rewards or making it tougher to qualify for benefits.
Consumers encounter redemption issues with earned benefits. Customers report problems with customer service and technical issues that prevent them from easily transferring rewards to third-party merchants. Issuers typically refer cardholders to partners and fail to reinstate rewards when customers can't redeem them though no fault of their own.
Companies revoke previously earned rewards. Consumers report losing their points, cash back, and miles when they close their account. Consumers also describe financial institutions revoking rewards on open and active accounts through expiration policies, which is often done without prior communication.
The CFPB reminds that federal consumer protection laws apply to rewards programs offered in connection with consumer financial products or services.
Read the CFPB’s press release here.
The full Issue Spotlight can be found here.
