On May 9, the CFPB issued a new report highlighting the issues consumers encounter with credit card rewards programs. The report was released in conjunction with a hearing co-hosted with the Department of Transportation and featured remarks from Director Chopra and Secretary of Transportation Pete Buttigieg, along with panelists from consumer groups, policy advocacy organizations, financial institutions, and airlines. Chopra, in particular, noted the lack of transparency in the rewards market and how many card issuers engage in bait-and-switch scams. As described in further detail in the report, the Bureau found the following issues with rewards programs;

• Credit card issuers make it hard for consumers to redeem rewards. The Bureau found that requirements detailed in the fine print of rewards programs’ terms and conditions do not match marketing materials, turning sign-up offers or other promotional rewards into a “bait and switch.”
• Companies devalue rewards. The Bureau stated that some issuers and merchant partners reduce the value of rewards already earned by increasing the number of points or miles needed for a redemption. The report also noted that card issuers do not protect consumers from rewards program partner decisions to remove benefits from rewards programs or increase requirements for achieving status.
• Redemption issues. Consumers described to the Bureau how customer service issues and technical glitches block or delay redemption, which prevent an easy transfer of rewards to third-party merchants.
• Companies revoke earned rewards. The Bureau found that points, cash back rewards, and miles vanish when an account closes. Consumers also told the Bureau that financial institutions revoke rewards on open and active accounts through expiration policies, which is often done without prior communication.

Putting It Into Practice: Credit card issuers are once again in the Bureau’s crosshairs. Chopra did not specify what laws are being violated here, and many of the practices detailed in the report are lawful. For example, expiring rewards or conditioning benefits on certain requirements is not an unlawful practice as long as such limitations are clearly and conspicuously disclosed. But the Bureau brought an enforcement action against a large financial institutions’ rewards program in July 2023 alleging deceptive conduct, and Chopra’s remarks show it likely will not be its last. Now is a good time for card issuers to review their reward programs to ensure they have appropriate policies and disclosures in place.

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