Advertising Law Blog

The Consumer Financial Protection Bureau (“CFPB”) is making it a priority to monitor credit card rewards programs and crack down on unfair or deceptive acts that prevent consumers from obtaining the advertised benefits of these programs.

Credit card rewards programs that promise financial incentives for spending have become a common method of marketing credit cards. In one of its “Issue Spotlights,” the CFPB reports that in 2023, it received over 1,200 consumer complaints over such reward programs, an increase of more than 70% over pre-pandemic levels. One frequent complaint involves co-branded credit cards and rewards programs where consumers can transfer miles or points from the card to merchant partners. Consumer complaints in this area emphasize that credit card companies often claim there is little they can do about the merchant/partner’s own policies and technical systems. As a legal matter, however, credit card issuers are primarily responsible for the advertising claims and administration of the rewards programs.

In response to the recent surge in complaints, the CFPB analyzed several hundred consumer complaints and identified four recurring themes that it will continue to scrutinize closely:

1) Requirements contained in the “fine print” of the terms and conditions that do not match, or even negate, claims made in marketing materials, thereby turning sign-up offers into “bait and switch” schemes.

2) The loss of previously earned benefits, which occurs when issuers and merchants change the rules after sign-up by, for example, increasing the number of points or miles needed for a redemption. These tactics make it difficult or impossible for consumers to claim the value of promised rewards. Related complaints are that card issuers do not protect customers from co-brand partners’ decisions to remove benefits from loyalty or changing requirements for achieving preferred status.

3) Customer service issues and technical glitches that block or delay reward redemptions, often by preventing the transfer of points to a third-party merchant. This includes complaints that issuers redirect cardholders to merchants and fail to reinstate points or rewards when cardholders are unable to redeem them through no fault of their own.

4) Consumers suddenly lose rewards such as points, cash back credits and miles when an account closes or the card issuer revokes rewards on open accounts through new expiration policies. The Consumer Financial Protection Act prohibits unfair, deceptive or abusive acts or practices and the CFPB has taken prior actions against credit card issuers that engaged in such acts or practices related to rewards.

TAKEAWAY: When designing rewards and loyalty programs, be sure to draft terms that clearly, conspicuously and accurately disclose all rewards, deadlines, expiration dates and any other material conditions of the program. While the program’s rules should include language that all terms can be changed unilaterally and without notice, all changes should be made sparingly in order to reduce the risk of CFPB scrutiny or private lawsuits.