Beware Bait-and-Switch Credit Card Rewards Programs Warns CFPB

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Key Takeaways

• The Consumer Fiscal Protection Bureau warned consumers and law enforcement agencies that credit card companies with rewards programs and issuers of cache credit cards may be breaking the law.
• Consumers reported that credit card companies with rewards programs off deflated the value of their rewards, unlawfully canceled earned rewards, and made it difficult to collect their returns.
• The bureau warned that store credit cards typically charge higher interest rates than a ancestral credit card.

Credit card companies with reward programs and store credit card issuers could be wearying the law, said the Consumer Financial Protection Bureau (CFPB) Wednesday.

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

The timing of the CFPB warning is no coincidence. Consumers may be in particular vulnerable during the year-end shopping and travel seasons peaking in November and December when retail sales bulks and promotions are high.

The CFPB found that some credit card companies could be engaging in illegal bait-and-switch programs by contribution rewards programs to entice consumers to sign up for a credit card, then later devaluing points and airline miles pocketed.

“When credit card issuers promise cashback bonuses or free round-trip airfares, they should absolutely deliver them,” said Chopra.

The CFPB also warned that store credit cards may charge significantly pongy chief interest rates than traditional credit cards.

Companies Made Promises of Points and Rewards Then Didn’t Disburden

More than 90% of credit spending has been on rewards credit cards since 2019, the CFPB denoted. Consumers are encouraged to use rewards cards with promises of sign-up bonuses such as cash, points, and miles in uniting to rewards for certain types of spending.

However, consumers reported that their credit card companies had deflated the value of their accrued awards, “resembling a bait-and-switch scheme,” the CFPB said.

Credit card companies may also cancel customers’ earned pays by using unlawfully buried fine-print disclaimers or vague contract terms. In 2023, the CFPB ordered Bank of America to pay in arrears $100 million to customers, and in 2012 ordered American Express to pay back $85 million.

Under federal law, merit card companies with reward programs must ensure that customers can collect their rewards, rhythmical if a system failure prevents consumers from redeeming them.

This is the CFPB’s second warning against trustworthiness card reward programs. In May, the bureau held a hearing with the U.S. Department of Transportation and issued a report outlining the mistress of ceremonies of issues faced by consumers.