Consumer Watchdog Takes Aim At Credit-Card Rewards Programs

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Some credit-card companies may be breaking the law by illegally devaluing accrued points, airline miles and other rewards used to entice cardholders, the Consumer Financial Protection Bureau said Wednesday.

Card companies may be violating federal law if they deploy promotional language that conflicts with fine-print disclaimers; use buried and vague terms to revoke customers’ rewards; or otherwise prevent customers from redeeming rewards, the federal consumer watchdog said in guidance to law enforcement agencies.

At the end of 2022, three-quarters of general-purpose credit cards were reward cards, while the amount of earned rewards has increased substantially in recent years, it noted.

“Large credit card issuers too often play a shell game to lure people into high-cost cards, boosting their own profits while denying consumers the rewards they’ve earned,” CFPB Director Rohit Chopra said in a statement.

Rewards programs and sign-up bonuses are a significant draw for consumers shopping for credit cards, especially those with high annual fees, the agency said in May, when it released a report on reward-program problems. The perks can include cash back, hotel and airline points, and access to lounges, among other items. Rewards cards are more frequently held by high-credit-score consumers, but they’re growing most quickly among those with poor credit scores, the agency said.

Consumers said card issuers sometimes increased the number of points needed to redeem a reward or didn’t protect them when reward-program partners removed benefits or changed their terms, the agency noted at the time. Consumers complained of technical issues, such as customer service problems that made it difficult to redeem rewards, or rewards disappearing when an account closed.

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