CFPB Cracks Down on Credit Card Rewards Industry for Deceptive Practices and Unfair Treatment of Consumers

The Consumer Financial Protection Bureau (CFPB) has revealed that it is examining methods to shield people’s rewards, prevent deceptive tactics, and foster a level playing field in the credit card rewards industry. This investigation comes in response to numerous customer complaints concerning the administration of rewards programs, which led the bureau to identify four major issues resulting in consumers failing to receive promised benefits, encountering unanticipated promotional circumstances, experiencing point devaluations, dealing with redemption difficulties, and even losing access to rewards altogether. The CFPB reported that customers have complained about discrepancies between the conditions detailed in the fine print of rewards programs’ terms and conditions and the marketing materials, which essentially transforms “sign-up bonuses or other promotional rewards into a ‘bait and switch.’” Furthermore, customers have grumbled that issuers and partner merchants have decreased the worth of previously obtained awards by raising the number of points or miles required for redemption. The CFPB stated that credit card companies frequently employ rewards programs as a “bait and switch” tactic by concealing terms in ambiguous language or fine print and modifying reward values after individuals have signed up and earned them. These findings come at a time when the Biden Administration is attempting to eliminate “junk fees,” which are regarded as concealed or misleading costs imposed on consumers. The proposed regulation would apply to significant credit card issuers, accounting for over 95% of total outstanding credit card debt. The CFPB has already taken action against issuers such as American Express and Bank of America regarding unfair, deceptive, or abusive practices linked to rewards programs. FOX Business contacted both organizations for comment. The CFPB’s investigation focuses on the rise of co-branded credit cards and rewards programs, which enable customers to exchange miles or points with merchants, as further complicating issues faced by consumers.