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The Consumer Financial Protection Bureau announced today that it’s taking actions to protect consumers from credit card rewards programs that potentially violate federal law in several specific ways.
This move follows a May 2024 CFPB report highlighting consumers’ frustrations with the terms of some credit card rewards programs, including complex and confusing rules, misleading promotions, difficulty redeeming rewards, rewards getting devalued, and rewards getting revoked without warning.
How credit card companies could break the law
In a circular sent to law enforcement agencies, the CFPB identified three ways that credit card companies could break the law:
Lowering the value of earned rewards. Because consumers decide whether to apply for a credit card in part because of what they can get when redeeming rewards, the circular states that lowering the advertised value of those rewards amounts to a “bait and switch.” While issuers include language in their terms and conditions saying they can change the value of rewards at any time, the CFPB says this is insufficient.
Burying important details in the fine print. When card issuers prominently advertise certain features of a card, but hide important limitations to those features in lengthy terms and conditions documents, this could be considered deceptive toward consumers.
Failing to allow consumers to redeem points due to “systems failures.” Consumers have complained to the CFPB about customer service issues, website glitches and other problems that made it impossible to redeem rewards.
Consequences for harming consumers
Issuers who are found to be in violation of federal law could face financial penalties. There are notable examples of this happening before.
In 2012, American Express had to pay $85 million to 250,000 consumers after the CFPB said the issuer violated consumer protection laws. This included consumers who signed up for the Blue Sky from American Express credit card (which is no longer available) to take advantage of a welcome offer promising a $300 bonus. Some consumers said they didn’t get the bonus, despite meeting the qualifications for it.
In 2023, Bank of America® had to pay $100 million to consumers, $90 million in penalties to the CFPB and $60 million in penalties to the Office of the Comptroller of the Currency after the CFPB said the bank committed a number of consumer-harming actions. One of those involved credit card rewards: Folks who applied for certain cards in person or over the phone were denied the advertised sign-up bonus.
How consumers can report violations
If you have a complaint about your credit card or another financial product, and your bank is unwilling to resolve the issue, you can report your complaint at consumerfinance.gov/complaint. You can also call (855) 411-2372.
The CFPB also has a way for employees of financial institutions to report violations they believe are occurring at their company. You can email [email protected] or call (855) 695-7974. More information about how to make a report is at consumerfinance.gov/whistleblower.
Other resources for consumers
The CFPB also announced the launch of “Explore Credit Cards,” an online tool allowing consumers to search for credit cards, with a particular focus on cards charging lower interest rates. Many of the options are issued by credit unions, which require you to meet membership qualifications in order to apply for their cards.
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