Today, the Consumer Financial Protection Bureau (CFPB) revealed steps they’re taking to safeguard consumers from credit card rewards programs that could be breaking federal law.
This initiative comes on the heels of a CFPB report released in May 2024, which shed light on several consumer grievances concerning credit card rewards programs. The report detailed issues like overly complex terms, misleading promotions, difficulty in redeeming rewards, unexpected devaluation, and sudden revocation of rewards.
How credit card companies might violate the law
In guidance sent to law enforcement agencies, the CFPB outlined three potential legal pitfalls for credit card issuers:
-
Devaluing earned rewards. The ability to redeem points is a major factor in why customers choose certain cards. If a company reduces the promised value of these rewards, it’s akin to a “bait and switch.” Although terms and conditions often state that rewards values may change, the CFPB finds this reasoning inadequate.
-
Hiding crucial information in the fine print. If card issuers prominently advertise particular perks but conceal significant restrictions within lengthy terms and conditions, this could be deemed deceptive to consumers.
- System failures obstructing reward redemption. The CFPB has received complaints about customer service issues, website errors, and other obstacles preventing consumers from claiming their rewards.
Consequences for consumer harm
Card issuers caught violating federal laws could face hefty fines as a consequence. There have been significant precedents:
In 2012, American Express was ordered to pay $85 million to 250,000 consumers after the CFPB found the company in violation of consumer protection laws. This included customers who had applied for the now-defunct Blue Sky card, motivated by a $300 bonus offer that, in some cases, was never honored even though the customers had met the necessary requirements.
Similarly, in 2023, Bank of America® was hit with a $100 million penalty to consumers, alongside $90 million and $60 million fines from the CFPB and the Office of the Comptroller of the Currency, respectively. This was due to multiple consumer rights infringements, including issues with denying advertised sign-up bonuses for certain credit card applications made via phone or in-person.
How consumers can report violations
Got a gripe with your credit card or another financial product and your bank isn’t cooperating? You can file a complaint at consumerfinance.gov/complaint or call (855) 411-2372.
Moreover, CFPB provides a platform for financial institution employees to report suspected violations at their workplaces. Reports can be made by emailing [email protected] or calling (855) 695-7974. More details on reporting can be found at consumerfinance.gov/whistleblower.
Other resources for consumers
The CFPB has introduced "Explore Credit Cards," an online tool designed to help consumers discover credit card options, emphasizing those with lower interest rates. This tool primarily features cards from credit unions, which you’ll need to join to apply.
This effort by the CFPB underscores its commitment to ensuring transparency and fairness in financial services, striving to protect consumers from misleading practices in the credit card industry.
