Consumer Finance Insights
May 17, 2024

CFPB Reports Troubling Trends in Credit Card Rewards Programs

On May 9, 2024, the Consumer Financial Protection Bureau (CFPB) issued a new Issue Spotlight regarding growing problems in the credit card rewards program industry.

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

When compared to pre-pandemic numbers, the number of complaints regarding credit card rewards programs received by the CFPB in 2023 increased by more than 70%.

The Spotlight details four recurring themes that emerged from the CFPB’s analysis of hundreds of these complaints.

  1. “Bait and Switch” Offers. Consumers complained that the promotional reward that they received was inferior to the advertised reward.  Others complained that they were denied promotional rewards when credit card issuers imposed vague or hidden conditions.
  2. Devaluation.  Consumers complained that they lost benefits when issuers devalued rewards by increasing the number of points needed to redeem a particular reward or by imposing barriers to make redemption more difficult.  They also complained that issuers have failed to protect customers when co-brand partners change the requirements for achieving status or remove benefits.
  3. Redemption Problems. Consumers complained that card issuer’s customer service is often unable to resolve their redemption issues and frequently will redirect customers to third-party merchants, which are similarly unhelpful.  They also complained of technical glitches when attempting to redeem rewards and that issuers have refused to reinstate rewards when cardholders were unable to redeem them with a third-party merchant through no fault of their own.
  4. Revocation of Rewards. Consumers complained that they were forced to forfeit previously earned rewards when card issuers unilaterally closed their accounts.  Consumers also complained that card issuers revoked rewards by imposing expiration dates without adequate warning and refused to reverse erroneous reward revocations.

The Spotlight emphasizes that “federal consumer protection laws, including the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts or practices, apply to rewards programs offered in connection with consumer financial products or services” and encourages credit card issuers to ensure their rewards programs are compliant.  The CFPB has taken prior action against credit card issuers for unfair, deceptive, and abusive practices.

The Spotlight cautions that the CFPB will continue to monitor credit card rewards programs and is paying careful attention to consumers’ experiences with these programs.  As noted in the Spotlight, “[t]he 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.”

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