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The Key Takeaways
- Consumer Financial Protection Bureau (CFPB) warned that store credit cards, credit card companies who offer rewards programs or credit card issuers may have violated the law.
- The consumers reported that some credit card companies had reward programs deflated their value. They also canceled their earned rewards and made it impossible to receive them.
- The Bureau warned that most store credit cards charge higher rates of interest than traditional credit cards.
The Consumer Financial Protection Bureau said Wednesday that credit card companies offering reward programs or store cards could be in violation of the law.
“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,” Rohit Chopra is the director of CFPB.
It is not a coincidence that the CFPB issued this warning at precisely the right time. Customers may be more vulnerable to scams during peak shopping and travel periods, such as November and Decembre when sales and discounts are at their highest.
CFPB has found some companies are engaging in bait-and switch schemes by offering reward programs that entice people to apply for a card and then reducing the value of points earned.
“When credit card issuers promise cashback bonuses or free round-trip airfares, they should actually deliver them,” Chopra is a popular name.
The CFPB has also stated that the interest rate on store credit cards could be significantly higher than other credit cards.
Companies Made Promises of Points and Rewards Then Didn't Deliver
The CFPB reported that since 2019 more than 90 percent of all credit card spending was on reward credit cards. Consumers have been encouraged to take advantage of rewards cards by offering sign-up bonuses like cash, points and miles as well as rewards on certain purchases.
However, consumers reported that their credit card companies had deflated the value of their accrued rewards, "resembling a bait-and-switch scheme," the CFPB said.
Credit card companies may also cancel customers' earned rewards by using unlawfully buried fine-print disclaimers or vague contract terms. Bank of America was ordered by the CFPB to reimburse customers $100 million in 2023. The court in 2012 also ordered American Express, Inc. to repay $85,000,000.
Federal law requires credit card companies offering reward programs to ensure customers receive their rewards even when a failure in the system makes it impossible for them to redeem them.
The CFPB has issued a second warning about credit card rewards programs. The CFPB held an hearing in May with the U.S. Department of Transportation, and released a report that outlined the many issues facing consumers.
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