Credit card rewards are often devalued or denied even after program terms are met, consumers have told the federal consumer financial protection agency, it said in a report released Thursday.
The Consumer Financial Protection Bureau (CFPB) further charged that credit card companies often use rewards programs as a “bait and switch” by burying terms in vague language or fine print and changing the value of rewards after people sign up and earn them. “New problems have been created by the growth of co-brand credit cards and rewards programs where consumers can transfer miles or points to merchants,” the agency said in the release.
The charges were made in the report “Credit Card Rewards,” which the CFPB said details how consumers describe how they are losing benefits to devaluation, limited redemption opportunities and “vague or hidden terms and conditions.”
The bureau said it will be looking for ways to “protect people’s points, stop bait-and-switch scams, and promote a fair and competitive market for credit card rewards,” according to the release.
“Credit card companies often use rewards programs as a ‘bait and switch’ by burying terms in vague language or fine print and changing the value of rewards after people sign up and earn them,” the CFPB said. “New problems have been created by the growth of co-brand credit cards and rewards programs where consumers can transfer miles or points to merchants.”
Among the complaints the CFPB said consumers level at the programs are:
- Requirements detailed in the fine print of rewards programs’ terms and conditions do not match marketing materials, turning sign-up offers or other promotional rewards into a “bait and switch.”
- Issuers and merchant partners reduce the value of rewards already earned by increasing the number of points or miles needed for a redemption. The agency said consumers also perceive that card issuers do not protect them from rewards program partner decisions to remove benefits from rewards programs or increase requirements for achieving status.
- Customer service issues and technical glitches block or delay redemption, preventing an easy transfer of rewards to third-party merchants. Issuers often redirect cardholders to partners and fail to reinstate rewards when consumers are unable to redeem them through no fault of their own.
- Points, cash back, and miles vanish when an account closes. Consumers also depict financial institutions revoking rewards on open and active accounts through expiration policies, which is often done without prior communication.
CFPB Report Highlights Consumer Frustrations with Credit Card Rewards Programs