Bureau warns against ‘illegal’ devaluing of rewards points by credit card firms; calls actions ‘bait and switch’

Some credit card companies operating rewards programs may be breaking the law, including by illegally devaluing rewards points and airline miles, the federal consumer financial protection agency warned Wednesday.

The Consumer Financial Protection Bureau (CFPB), in a circular (2024-07) to law enforcement agencies, called the devaluing a “bait-and-switch” credit card reward tactic. The circular addresses practices in credit card rewards programs, which CFPB said companies increasingly use to encourage consumers to apply for and use specific cards.

“Since 2019, more than 90% of general-purpose credit card spending occurred on rewards cards,” the bureau said in a release. “In today’s marketplace, credit card issuers often promise cash, points, and miles sign-up bonuses to consumers, as well as rewards for certain types of spending. Consumers have reported to the CFPB that these rewards can be difficult to redeem or are sometimes devalued by policy changes by partners.”

The circular attempts to answer the question of “can credit card issuers violate the law if they or their rewards partners devalue earned rewards or otherwise inhibit consumers from obtaining or redeeming promised rewards?”

“Yes,” the circular states. “Covered persons that offer, provide, or operate credit card rewards programs, and their service providers, may violate the prohibition against unfair, deceptive, or abusive acts or practices in a variety of circumstances, including instances where some of the conduct in question may be attributable to a third party, such as a merchant partner, and regardless of whether covered persons or service providers are taking actions consistent with rewards program terms.”

The circular provides examples where covered persons that offer, provide, or operate credit card rewards programs, and their service providers, may violate the prohibition against unfair, deceptive, and abusive acts or practices. CBPB said those include instances where:

• the redemption values of rewards that consumers have already earned or purchased are devalued;
• consumers’ receipt of rewards is revoked, canceled, or prevented based on buried or vague conditions, such as criteria disclosed only in fine print or up to the operator’s discretion; or
• consumers have reward points deducted from their balance without receiving the corresponding benefit of the rewards, including due to technical failures when redeeming rewards points on merchant partners’ systems.

Consumer Financial Protection Circular 2024-07