WASHINGTON — Consumer are encountering “numerous problems” with credit cards rewards programs, according to a new report by the Consumer Financial Protection Bureau (CFPB).
“Consumers tell the CFPB that rewards are often devalued or denied even after program terms are met,” the Bureau said in releasing its report. “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.
‘Increasingly Complex’
The CFPB said credit card rewards programs have become “increasingly complex” in recent years.
“Especially for credit cards with high annual fees, a key part of attracting consumer interest comes from benefits like getting airline miles or hotel points and access to exclusive lounges and loyalty status that affords premium service or additional perks,” the CFPB said. “Introductory offers have existed since the first rewards cards, but their amount and prevalence has dramatically climbed. Nearly 1-in-10 dollars earned by consumers in rewards are linked to sign-up bonuses.”
Growing Complaints
The CFPB said it has received a growing number of complaints on how these rewards programs have been administered.
Among the most common complaints received:
- Credit card issuers impose vague or hidden conditions that keep consumers from receiving rewards. “Consumers indicate that 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.”
- Companies devalue rewards. “Consumers mention that issuers and merchant partners reduce the value of rewards already earned by increasing the number of points or miles needed for a redemption. Consumers also observe that card issuers do not protect them from rewards program partner decisions to remove benefits from rewards programs or increase requirements for achieving status.”
- Consumers encounter redemption issues with earned benefits. “Consumers describe customer service issues and technical glitches that block or delay redemption, which prevent 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.”
- Companies revoke previously earned rewards. “Consumers indicate their points, cash back, and miles vanish when an account closes. Consumers also describe financial institutions revoking rewards on open and active accounts through expiration policies, which is often done without prior communication.”
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