Consumer Financial Protection Circular 2024-07: Design, Marketing, and Administration of Credit Card Rewards Programs, 106277-106281 [2024-30988]
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Federal Register / Vol. 89, No. 249 / Monday, December 30, 2024 / Rules and Regulations
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Chapter X
Consumer Financial Protection
Circular 2024–07: Design, Marketing,
and Administration of Credit Card
Rewards Programs
Consumer Financial Protection
Bureau.
ACTION: Consumer financial protection
circular.
AGENCY:
The Consumer Financial
Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection
Circular 2024–07 titled, ‘‘Design,
marketing, and administration of credit
card rewards programs.’’ In this circular,
the CFPB responds to the question,
‘‘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?’’
DATES: The CFPB released this circular
on its website on December 18, 2024.
ADDRESSES: Enforcers, and the broader
public, can provide feedback and
comments to Circulars@cfpb.gov.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation & Guidance Program
Analyst, Office of Regulations, at 202–
435–7700 or at: https://
reginquiries.consumerfinance.gov/. If
you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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Question Presented
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?
Response
Yes. 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. This circular provides
some 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
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acts or practices, where: (1) the
redemption values of rewards that
consumers have already earned or
purchased are devalued; (2) 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 (3) 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.
Background on Credit Card Rewards
Programs
Rewards programs are increasingly
used to encourage consumers to apply
for and use specific credit cards.1 As of
2019, more than 90 percent of general
purpose credit card spending occurred
on rewards cards, and by the end of
2022, 75 percent of general purpose
credit cards were rewards cards.2 While
rewards cards are more common for
consumers with higher credit scores, the
use of rewards cards is growing fastest
among deep subprime, subprime, and
near-prime consumers.3 The amount of
1 See CFPB, The Consumer Credit Card Market
(Oct. 2023) (hereinafter ‘‘2023 Report’’) at 98,
https://files.consumerfinance.gov/f/documents/
cfpb_consumer-credit-card-market-report_2023.pdf.
An industry survey found that rewards and cash
back programs were the top reason why consumers
chose one card over another, as well as the top
reason consumers cited for increasing spending on
credit cards over the last six months. PYMNTS and
Elan, Credit Card Use During Economic Turbulence
(Dec. 2023), https://www.pymnts.com/wp-content/
uploads/2023/05/PYMNTS-Credit-Card-UseDuring-Economic-Turbulence-May-2023.pdf. See
also Arielle Feger, Cash-back rewards drive
consumers to open new credit cards, eMarketer
(Mar. 26, 2024), https://www.emarketer.com/
content/cash-back-rewards-drive-consumers-opennew-credit-cards; Drazen Prelec, How credit cards
activate the reward center of our brains and drive
spending, MIT Sloan (June 9, 2021), https://
mitsloan.mit.edu/experts/how-credit-cards-activatereward-center-our-brains-and-drive-spending.
2 2023 Report at 99. One study also found that
between 2021 and 2023, while total credit card
applications decreased by 2 percent, applications
for rewards cards and rewards cards with tiered
earnings grew by 5 percent and 8 percent,
respectively. Marketa Canayaz, Consumer Demand
for Rich Rewards Rises, Comscore (July 17, 2024),
https://www.comscore.com/Insights/Blog/
Consumer-Demand-for-Rich-Rewards-Rises.
3 2023 Report at 100. See also Electronic
Payments Coalition, New Study Shows LMI
Households Rely on Credit Card Rewards,
Electronic Payments Coalition (Apr. 30, 2024),
https://electronicpaymentscoalition.org/2024/04/
30/new-study-data-shows-credit-card-rewards-area-lifeline-for-working-class-americans/. Despite the
growth in the use of rewards cards among
consumers with lower credit scores, in many cases,
these consumers do not benefit from these rewards
programs, and research has shown that consumers
with higher credit scores generally benefit from
credit card rewards programs at the expense of
consumers with lower credit scores. See Sumit
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money or value that consumers earn and
maintain in credit card rewards
programs is also large and has increased
substantially in recent years. For
example, in 2022, consumers earned
more than $40 billion in rewards from
major general-purpose credit cards,
more than a 50 percent increase from
2019.4 Consumer rewards balances at
the end of 2022 were more than $33
billion, up 40 percent relative to the
fourth quarter of 2019.5 More consumers
are also using rewards to make
payments, including for day-to-day
purchases and necessary expenses.6
Credit card rewards programs are
typically structured around earning
rewards ‘‘currencies’’—most commonly
‘‘miles’’ or other units of value issued by
a co-brand partner (such as an airline or
hospitality chain) or, alternatively, a
credit card issuer’s own ‘‘points.’’ 7
Consumers typically earn miles or
points through credit card spending or
by directly purchasing them in
accordance with pre-determined
formulas, or ‘‘earn rates.’’ 8 Many issuers
also offer promotional rewards through
things like sign-up bonuses and
referrals.9
Once earned or purchased by
consumers, points can be redeemed for
rewards like ‘‘cash back’’ (statement
Agarwal, et al., Who Pays for Your Rewards?
Redistribution in the Credit Card Market (Dec. 5,
2022), https://dx.doi.org/10.2139/ssrn.4126641.
4 CFPB, Credit Card Rewards (May 2024)
(hereinafter ‘‘Credit Card Rewards Issue Spotlight’’)
at 9, https://files.consumerfinance.gov/f/
documents/cfpb_credit-card-rewards_issuespotlight_2024-05.pdf.
5 2023 Report at 100. Notably, consumers also
forfeit about $500 million in rewards each year. Id.
at 102.
6 See Rimma Kats, Survey Highlights Growing
Consumer Appetite for Paying with Points,
Payments Journal (Jan. 3, 2024), https://
www.paymentsjournal.com/survey-highlightsgrowing-consumer-appetite-for-paying-with-points/
(noting that a majority of consumers favor
redeeming their points at grocery stores, online
retail outlets, and at gas stations). See also Chase
Survey Reveals How Credit Card Rewards Are
Enhancing The Holiday Season, Chase Media
Center (Nov. 20, 2023), https://media.chase.com/
news/chase-holiday-rewards-survey (noting that
during the holiday season, 33 percent of consumers
planned to use rewards to pay for gifts and 25
percent on groceries for holiday meals). See, e.g.,
Bilt, How do I redeem points towards a down
payment?, https://support.biltrewards.com/hc/enus/articles/10377953401869-How-do-I-redeempoints-towards-a-down-payment.
7 See Agarwal supra note 4, at 8. In 2021, more
than one in three general purpose credit cards
offered were co-branded. See 2023 Report at 25. In
addition to rewards currencies and cash back,
rewards programs also increasingly offer other
affiliated benefits or lifestyle rewards, such as
access to airport lounges and priority boarding.
Credit Card Rewards Issue Spotlight at 8.
8 See CFPB, The Consumer Credit Card Market at
212–13 (Dec. 2015), https://
files.consumerfinance.gov/f/201512_cfpb_reportthe-consumer-credit-card-market.pdf.
9 See id. at 213.
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credits or direct deposits) or transfers to
a co-brand or merchant partner (e.g.,
miles or merchant-specific gift cards),
and also for other types of goods or
services, like buying merchandise,
donating to charities, applying to
purchases at check out, and others.10
However, both credit card issuers and
loyalty programs generally reserve, and
often assert a right to, unilaterally
change the value of rewards, including
at the point of redemption.11 Reward
points or miles valuation changes can
sometimes be tied to price changes in
the underlying product or service for
which the reward is being redeemed
(e.g., changes in flight pricing), but
program operators also adjust rewards
redemption rates distinct from
underlying prices, apparently as a
means to ‘‘preserve’’ or ‘‘maintain’’
profit margins.12
10 Credit Card Rewards Issue Spotlight, supra
note 4, at 7. Both quantitative and qualitative
evidence indicate consumers spend across months
or years to earn sufficient points or miles for
infrequent large purchases. See, e.g., id. at 15; 2023
Report at 100.
11 See, e.g., American Express, Membership
Rewards Program Terms and Conditions, https://
rewards.americanexpress.com/myca/loyalty/us/
catalog/tandc (last accessed Sept. 4, 2024); Citi, Citi
ThankYou Rewards Terms & Conditions, https://
www.thankyou.com/cms/thankyou/
tc.page?pageName=tc (last accessed Sept. 4, 2024);
Chase, Chase Sapphire Preferred® with Ultimate
Rewards® Program Agreement, https://
www.chase.com/sapphire/rewardsagreement (last
accessed Sept. 4, 2024); Wells Fargo, Wells Fargo
Rewards® Program Terms and Conditions and
Addendum, https://
consumercard.wellsfargorewards.com/#/tnc (last
accessed Sept. 4, 2024); Southwest, What are the
Rapid Rewards Rules and Regulations, https://
support.southwest.com/helpcenter/s/article/rapidrewards-rules-and-regulations (last accessed Sept.
4, 2024) Emily McNutt, Delta is making it more
expensive to earn elite status—here’s how you can
bypass the new requirements, CNN (Aug. 28, 2023),
https://www.cnn.com/cnn-underscored/travel/
delta-airlines-status-requirements-update; Sean
Cudahy, Alaska Airlines raises lounge membership
prices, tightens access, The Points Guy (Nov. 9,
2023), https://thepointsguy.com/news/alaskalounge-restrictions/; Zach Griff, Why United’s
increased status thresholds might not be as bad as
they seem, The Points Guy (Nov. 11, 2022), https://
thepointsguy.com/news/united-premier-changesnot-so-bad/.
12 See, e.g., United Airlines, MileagePlus Investor
Presentation, at 23 (June 15, 2020) (MileagePlus
program can ‘‘adjust[ ] award pricing based on
expected foregone revenue for United’’), https://
ir.united.com/static-files/1c0f0c79-23ca-4fd2-80c1cf975348bab9; Delta Airlines, Delta Air Lines
SkyMiles Investor Presentation, at 17 (Sept. 14,
2020) (dynamic pricing model of SkyMiles rewards
program allows ‘‘flexibility to control costs and
preserve margins’’), https://www.sec.gov/Archives/
edgar/data/27904/000119312520244688/
d27099dex991.htm; American Airlines, American
Airlines AAdvantage Investor Presentation, at 22,
35 (Mar. 2021) (AAdvantage ‘‘control[s] the
‘exchange rate’ between miles and dollars,’’ which
provides flexibility to ‘‘manage costs’’ and ‘‘steer
reward demand to optimal flights based on cash
displacement risk.’’), https://www.sec.gov/Archives/
edgar/data/6201/000000620121000022/
aainvestorpresentation.htm.
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As the market for credit card rewards
programs has grown, so too has their
complexity.13 Rewards program
operators often assert their ability to
unilaterally modify credit card rewards
programs, which has caused at least one
State to take action to provide
consumers with additional protections
against such unilateral program
modifications.14 Additionally, the
number of consumer complaints that the
CFPB receives about credit card rewards
programs has also risen dramatically in
recent years.15 Many consumers’
complaints describe how the marketing
or initial offering of a rewards program
is inconsistent with their actual, later
experiences earning and redeeming
credit card rewards. For instance,
consumers have complained to the
CFPB about companies devaluing their
rewards relative to what they were
marketed, or increasing barriers to
redeeming cash or cash-equivalent
rewards, such as eliminating the ability
for consumers to redeem points for a
statement credit.16
Consumers have also complained
about being denied access to
promotional or other rewards because of
terms or other requirements hidden in
their cardholder or rewards program
agreements, including instances of
unexpectedly being found ineligible
after applying for a credit card 17 or
being forced to return a promotional
offer because they closed their account
within a certain period.18 For many of
these types of complaints, companies
and merchant partners justified
revoking, canceling, or preventing
consumer access to rewards through
requirements and guidelines absent
from their marketing materials and only
found buried in their cardholder or
rewards program agreements.
Consumers have also repeatedly
alerted the CFPB about difficulties
redeeming their rewards or inexplicably
seeing their points disappear. These
reported challenges include issues with
13 See Jamie Lauren Keiles, The Man Who Turned
Credit-Card Points Into an Empire, The New York
Times (Jan. 5, 2021), https://www.nytimes.com/
2021/01/05/magazine/points-guy-travelrewards.html (how ‘‘as rewards programs have
multiplied, the earned point has grown increasingly
complex and fungible’’); Credit Card Rewards Issue
Spotlight, supra note 4, at 6.
14 See Credit Card Rewards Issue Spotlight, supra
note 4, at 11, 20; New York General Business Law
§ 520–e (2023).
15 In 2023, there was a more than 70 percent
increase in complaints involving credit card
rewards over pre-pandemic levels. Credit Card
Rewards Issue Spotlight, supra note 4, at 2.
16 See, e.g., id. at 15, 16.
17 See, e.g., id. at 13.
18 See, e.g., id. at 15.
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customer service,19 technical failures,20
and dispute resolution,21 all of which
can be further compounded when
neither the issuer nor its merchant
partner accept responsibility and both
refer consumers to the other.22 Because
of these issues, some consumers have
seen their rewards disappear when
being transferred or applied to a
merchant partner, with little recourse to
resolve such problems.23
Analysis
The CFPA prohibits any ‘‘covered
person’’ or ‘‘service provider’’ from
‘‘committing or engaging in an unfair,
deceptive, or abusive act or practice
under Federal law in connection with
. . . the offering of a consumer financial
product or service.’’ 24 An act or practice
is unfair when: (1) it causes or is likely
to cause substantial injury to consumers
that is not reasonably avoidable by
consumers and (2) such injury is not
outweighed by countervailing benefits
to consumers or to competition.25
Substantial injury includes monetary
harm, and may be based on likely rather
than actual injury.26 In general, an
injury is not reasonably avoidable if
consumers cannot reasonably anticipate
the injury, or when there is no way to
avoid the injury even if it is
anticipated.27
Under the CFPA, a representation,
omission, or practice is deceptive if it is
likely to mislead a reasonable consumer
and is material.28 Representations,
omissions, or practices are ‘‘material’’ if
they ‘‘involve[ ] information that is
important to consumers and, hence,
likely to affect their choice of, or
conduct regarding, a product.’’ 29 In
assessing the meaning of a
communication, the CFPB looks to its
overall, net impression; in other words,
the CFPB considers the entire
advertisement, transaction, or course of
dealing rather than evaluating
19 See,
e.g., id. at 17.
e.g., id. at 18.
21 See, e.g., id.
22 See, e.g., id.
23 See, e.g., id. at 19.
24 12 U.S.C. 5531(a); see also 12 U.S.C.
5536(a)(1)(B).
25 12 U.S.C. 5531(c)(1).
26 See, e.g., FTC v. Wyndham Worldwide Corp.,
799 F.3d 236, 246 (3d Cir. 2015).
27 See FTC v. Neovi, Inc., 604 F.3d 1150, 1158
(9th Cir. 2010) (interpreting whether consumer’s
injuries were reasonably avoidable under the FTC
Act); Orkin Exterminating Co. v. FTC, 849 F.2d
1354, 1365–66 (11th Cir. 1988) (same); Am. Fin.
Servs. Ass’n v. FTC, 767 F.2d 957, 976 (D.C. Cir.
1985) (same).
28 See CFPB v. Gordon, 819 F.3d 1179, 1192–93
(9th Cir. 2016).
29 Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C.
Cir. 2000) (quoting In re Cliffdale Assocs., Inc., 103
FTC 110, 165 (1984)).
20 See,
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statements in isolation.30 A
misrepresentation can be ‘‘an express or
implied statement [that is] contrary to
fact.’’ 31 It may also be deceptive, for
example, when a seller partially
discloses information about the nature
of a product or service, but fails to
disclose other material information.32
Further, ‘‘[w]ritten disclosures or fine
print may be insufficient to correct a
misleading representation.’’ 33
Rewards programs are a feature
common to many credit cards, and tend
to both be prominently marketed by
issuers and widely used by
consumers.34 Credit card rewards
programs also play a major role in
consumer’s choices on which cards to
apply for and use for any given
transaction.35
The CFPB is issuing this circular to
underscore that the CFPA’s prohibition
on unfair or deceptive acts or practices
applies to the design, marketing, and
administration of credit card rewards
programs.36 Rewards program operators
30 See, e.g., CFPB v. Aria, 54 F.4th 1168, 1173 (9th
Cir. 2022); Gordon, 819 F.3d at 1193; FTC v. E.M.A.
Nationwide, Inc., 767 F.3d 611, 631 (6th Cir. 2014);
Fanning v. FTC, 821 F.3d 164, 170 (1st Cir. 2016).
31 FTC, Policy Statement on Deception (Oct. 14,
1983).
32 See, e.g., Sterling Drug, Inc. v. FTC, 741 F.2d
1146, 1154 (9th Cir. 1984) (advertisements referring
to ‘‘unique formula’’ were deceptive because they
could lead consumers to infer that pain reliever’s
formulation was something other than ordinary
aspirin); see also FTC v. Bay Area Business Council,
Inc., 423 F.3d 627, 635 (7th Cir. 2005) (‘‘[T]the
omission of a material fact, without an affirmative
misrepresentation, may give rise to an FTC Act
violation.’’).
33 FTC, Policy Statement on Deception (Oct. 14,
1983).
34 In 2022, rewards card spending was 90 percent
of all consumer spending on general purpose credit
cards. CFPB, The Consumer Credit Card Market, at
99 (Oct. 2023), https://files.consumerfinance.gov/f/
documents/cfpb_consumer-credit-card-marketreport_2023.pdf. See also Background on Credit
Card Rewards Programs, supra.
35 Id. at 98. Because credit card rewards programs
are offered or provided ‘‘in connection’’ with a
consumer financial product or service (the
extension of credit to consumers), the ‘‘covered
persons’’ or ‘‘service providers’’ who offer, provide,
or support such programs (hereinafter ‘‘rewards
program operators’’) must comply with the CFPA,
including its prohibitions against unfair, deceptive
or abusive acts or practices, as well as other
applicable consumer financial protection laws. In
the typical case, a credit card issuer providing the
rewards program would be a ‘‘covered person,’’
while ‘‘service providers’’ could include the
partners or vendors that provide material services
on the rewards program in connection with the
credit card program, such as co-brand or merchant
partners that deliver applicable rewards, or vendors
who operate the key infrastructure or platforms for
consumers to view, manage, and use their rewards
earnings. See 12 U.S.C. 5481(6), 5481(26)(A).
36 While not specifically discussed in this
circular, rewards program operators must also
comply with the CFPA’s prohibition on abusive acts
or practices, 12 U.S.C. 5531(d), which provides that
an act or practice is abusive if it (1) materially
interferes with a consumer’s ability to understand
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may violate this prohibition in a variety
of circumstances regardless of whether
they are taking actions consistent with
rewards program terms. In particular,
rewards program operators risk
committing unfair or deceptive acts or
practices when (1) rewards that
consumers have already earned are
devalued; (2) consumers’ receipt of
rewards is revoked, cancelled, or
prevented based on buried or vague
conditions; and (3) rewards points are
deducted without consumers receiving
the corresponding benefit of the
rewards. These examples are illustrative
and non-exhaustive.
As described further below, the CFPB
emphasizes that covered persons that
offer, provide, or operate credit card
rewards programs may be liable for an
unfair or deceptive act or practice where
some of the conduct in question may be
attributable to a third party or service
provider, such as a merchant partner.37
Devaluation of Rewards Already
Earned or Purchased
Rewards program operators may
commit an unfair or deceptive act or
practice when they materially reduce
the overall value of rewards that
consumers have already earned or
purchased. Consumers make decisions
on whether to open or use a credit card
based on the explicit and implicit
representations about the value of card
benefits and rewards. For instance,
consumers’ reasonable expectations
about the value of rewards may be
informed by advertisements at account
opening, as well as by redemption
values of rewards communicated to
consumers on or around the time the
consumer makes decisions to purchase
goods with the card and accrue rewards
benefits. Furthermore, fine print
disclaimers or contract terms stating
that rewards program operators have the
right to adjust rewards offerings often
will not be sufficient to correct
a term or condition of a consumer financial product
or service or (2) takes unreasonable advantage of the
consumer’s (a) lack of understanding of the material
risks, costs, or conditions of the product or service;
(b) inability to protect their interests in selecting or
using a consumer financial product or service; or
(c) reasonable reliance on a covered person to act
in the consumer’s interests.
37 See, e.g., CFPB v. Ocwen Fin. Corp., No. 17–
80495–CIV, 2019 WL 13203853 at *30 (S.D. Fla.
Sept. 5, 2019) (finding that the CFPB sufficiently
alleged CFPA violations regarding add-on products
even where add-on vendor was responsible for
enrolling borrowers to such add-on products); see
also, e.g., FTC v. Bay Area Bus. Council, Inc., 423
F.3d at 630) (affirming district court ruling that
multiple interrelated corporate and individual
defendants were liable under section 5 of FTC Act
for deceptive telemarketing scheme); FTC v. Neovi,
Inc., 604 F.3d 1150, 1155 (9th Cir. 2010) (‘‘a single
violation of the [FTC] Act may have more than one
perpetrator’’) (citing Bay Area).
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consumers’ net impression about the
expected value of rewards.
When rewards operators influence
consumers’ expectations about the value
of rewards in their product or marketing
efforts (e.g., to support customer
acquisition, retention, or increased
purchase volume), but later make
decisions to deflate the overall value of
accrued rewards, they may have
engaged in actions that resemble a
traditional ‘‘bait-and-switch’’ scheme.38
These activities may constitute unfair or
deceptive acts or practices under the
CFPA.39
Enforcers investigating potentially
unfair or deceptive acts or practice
should consider a variety of different
devaluation tactics by rewards program
operators. Unfair or deceptive
devaluations are easier to detect when
the rewards program involves simple,
fixed redemption rates with one retailer
or merchant partner. But such schemes
may be harder to detect where there are
numerous potential rewards available or
rewards program operators implement
more complex program changes. For
example, if a rewards program operator
uses dynamic pricing for rewards
redemptions, enforcers can examine
whether the firm is unfairly or
deceptively devaluing points over time
by considering, for example, whether
the dynamic prices in points have
increased, in aggregate, relative to
dynamic cash prices for the same
products or services. Similarly, if a
rewards program includes redemption
options from multiple participating
merchant partners, and the rewards
program operator loses a major
merchant partner or a major partner
materially downgrades the service
provided, enforcers can look to whether
the rewards program operator is taking
reasonable measures to generally
maintain the value of rewards, such as
by increasing points usable at other
merchant partners, allowing customers
to cash out points, replacing lost
rewards with other rewards, or by other
38 See 16 CFR 238 et seq., FTC Guides Against
Bait Advertising. Cf. Rossman v. Fleet Card (R.I.)
Nat. Ass’n, 280 F.3d 384, 396–400 (3d Cir. 2002)
(credit card issuer soliciting business with noannual-fee offer while intending to later impose fee
constitutes a bait-and-switch scheme).
39 Cf. 24. FR 9755 (Dec. 4, 1959) (noting that FTC
enforcement actions with respect to bait-and-switch
schemes are brought under the FTC Act’s
prohibition on ‘‘unfair or deceptive acts or
practices’’); 32 FR 15540 (Nov. 8, 1967) (similar);
Synopsis of Federal Trade Commission Decisions
Concerning ‘‘Bait and Switch’’ Sales Practices
(Sept. 23, 1975) (‘‘The Federal Trade Commission
has determined that ‘bait and switch’ practices are
unfair or deceptive trade practices and are unlawful
under Section 5(a)(1) of Federal Trade Commission
Act.’’), https://www.ftc.gov/system/files/ftc_gov/
pdf/NOPO-Bait-and-Switch.pdf.
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means. Additionally, when two firms
merge, resulting in a conversion of one
firm’s customers into a new rewards
program, enforcers can look at whether
the resulting firm took actions to
convert customers’ points to the new
system without a reduction in points
value.40
In any investigation into whether a
rewards program operator has engaged
in an unfair or deceptive devaluation
scheme, enforcers are encouraged to
collect and consider accounting or other
metrics maintained by program
operators or others regarding rewards
values. For example, many companies
maintain internal figures on the dollar
value of outstanding rewards for
accounting purposes, including an
estimated cost-per-point or weighted
average redemption cost.41 If a firm’s
cost-per-point or weighted average
redemption cost decreases over time,
that could suggest a firm has engaged in
a bait-and-switch or similar unfair or
deceptive act or practice.
The CFPB emphasizes that covered
persons that offer, provide, or operate
credit card rewards programs may be
liable for an unfair or deceptive act or
practice even when the material
devaluation of rewards could arguably
be attributed to the actions of a third
party. In other words, if a covered
person that offers, provides, or operates
a credit card rewards program makes
explicit or implicit representations
about, and thereby induces consumer
expectations regarding, the value of the
card benefits or rewards, and the value
of those benefits or rewards is
subsequently materially reduced by
actions that may be attributable to the
covered person’s merchant partner, the
40 See, e.g., U.S. DOT, USDOT Requires Alaska
and Hawaiian Airlines to Preserve Rewards Value,
Critical Flight Service as Merger Moves Forward
(Sept. 2024), https://www.transportation.gov/
briefing-room/usdot-requires-alaska-and-hawaiianairlines-preserve-rewards-value-critical-flight (in
connection with regulatory merger approvals,
Department of Transportation imposed ‘‘rewards
protections against devaluation,’’ including
requiring each earned loyalty program be converted
to new program miles at 1:1 ratio and prohibiting
‘‘any actions that would devalue HawaiianMiles
miles’’). The merger approval and requirements
were based on ‘‘[p]ublic interest criteria [that]
include preventing unfair, deceptive, predatory or
anticompetitive practices. . . .’’ Id.
41 See, e.g., Capital One Financial Corporation,
Annual Report (Form 10–K) (Feb. 24, 2023) (‘‘We
use the weighted-average redemption cost during
the previous twelve months, adjusted as
appropriate for recent changes in redemption costs,
. . . to estimate future redemption costs.’’).
Similarly, informational websites aimed at
consumers may also estimate rewards point values.
See, e.g., The Points Guy, TPG launches new datadriven valuations for 6 major US airlines—and
updates methodology for credit card currencies
(Sept. 8, 2023), https://thepointsguy.com/news/
new-data-driven-valuations/.
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covered person may be liable for an
unfair or deceptive act or practice.
Hidden Conditions
Rewards program operators also risk
committing unfair or deceptive acts or
practices when they revoke or cancel
rewards, or prevent the award of
rewards, based on buried or vague
conditions.42 Rewards programs have
become increasingly complex, with
lengthy terms and unintuitive
restrictions that consumers may not be
aware of as they use their credit cards
day to day. These lengthy terms may use
buried or vague conditions set by
rewards program operators that are nonnegotiable and may not be consistent
with prominent promotional language
advertising the rewards that consumers
can earn. As noted above, consumer
complaints received by the CFPB
suggest that, despite descriptions in the
fine print of rewards program terms,
consumers often do not understand the
basis of many rewards forfeitures or
denials.
The following are illustrative
examples of potentially unfair rewards
program practices:
• Revoking or canceling rewards
based on vague catch-all language in
program terms, such as ‘‘gaming’’ or
‘‘abuse.’’ This can be especially
problematic when those terms are also
subject to the rewards program
operator’s discretion.43
• Revoking previously earned
rewards based on policies that tie
revocation to actions that are not within
the consumer’s control and do not
constitute fraud or misconduct by the
consumer, like an issuer unilaterally
closing an account.44
• Promotional ‘‘sign-up’’ offers that
are denied based on hidden conditions
that consumers were not reasonably
aware of, such as ‘‘churning’’ conditions
that restrict how frequently a consumer
can earn sign-up rewards, time periods
to earn rewards that are effectively
shortened by the hidden and
unavoidable period of time needed to
receive and activate a card, or
promotional offers that are unavailable
for applicants through certain channels.
42 Additionally, rewards program terms that
include unlawful or unenforceable conditions may
violate the CFPA’s prohibition on deceptive acts or
practices. CFPB Circular 2024–03, Unlawful and
unenforceable contract terms and conditions (June
2024), https://www.consumerfinance.gov/
compliance/circulars/consumer-financialprotection-circular-2024-03/. For example, the
recently enacted New York statute referenced above
may render certain terms in rewards program
deceptive with respect to New York residents.
43 See Credit Card Rewards Issue Spotlight, supra
note 4, at 14.
44 Id. at 20.
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These sorts of dark patterns and fine
print will often constitute deceptive
representations, omissions, or practices
about material concerns, and thus
violate the prohibition on deceptive
practices.45 In addition, denying or
preventing rewards based on buried or
vague terms could cause a substantial
monetary injury in the form of lost
rewards value and may be unfair.46
These injuries may not be reasonably
avoidable by consumers where
conditions are buried or vague, and
accordingly hinder consumers’ ability to
make a ‘‘free and informed choice.’’ 47
Specifically, consumers cannot
reasonably avoid injuries where they are
not ‘‘adequately informed’’ of key
conditions or presented such
information in a confusing way.48 As
noted above, rewards program operators
typically promote most prominently the
availability of rewards, even more so
than other key credit card terms, such
as APR or annual fees, while putting
conditions around rewards in fine
print.49 Consumers may not understand
the restrictive eligibility criteria buried
in the fine print where program
operators send marketing materials that
target rewards promotions to the
specific consumers.50 Similarly, a
consumer may be confused by the way
a rewards program operator interprets
vague catch-all language, such as terms
restricting rewards based on
impermissible ‘‘gaming’’ or ‘‘abuse,’’
45 See FTC, Bringing Dark Patterns to Light, at 7
(Sept. 2022) (‘‘Some dark patterns operate by hiding
or obscuring material information from consumers,
such as burying key limitations of the product or
service in dense Terms of Service documents that
consumers don’t see before purchase.’’), https://
www.ftc.gov/system/files/ftc_gov/pdf/P214800%
20Dark%20Patterns%20Report%209.14.2022%20%20FINAL.pdf. Cf. FTC v. Amazon.com, 2024 WL
2723812 at *1 (W.D. Wash. 2024) (denying motion
to dismiss of claims brought under Section 5 of the
FTC Act and the Restore Online Shoppers’
Confidence Act based on defendants ‘‘trick[ing],
coerc[ing], and manipulat[ing] consumers . . . by
failing to disclose the material terms of the
subscription clearly and conspicuously and by
failing to obtain consumers’ informed consent
before enrolling them’’); FTC v. Publishers Clearing
House LLC, No. 23–CV–4735 (E.D.N.Y. June 6,
2023) (complaint) (alleging defendant ‘‘employs
dark patterns throughout the consumer’s experience
by, among other things . . . placing disclosures in
small and light font and in places where a
consumer is unlikely to see them’’).
46 CFPB research suggests consumers lose
hundreds of millions of dollars in earned rewards
each year. 2023 Report, at 102.
47 See FTC v. Neovi, 604 F.3d at 1158; Am. Fin.
Servs. Ass’n v. FTC, 767 F.2d at 976.
48 See, e.g., FTC v. Commerce Planet, Inc., 878 F.
Supp. 2d 1048, 1079 (C.D. Cal. 2012) (consumers
could not reasonably avoid injury where sign-up
pages did not adequately disclose negative option
plan by burying in separate fine print disclosures).
49 Credit Card Rewards Issue Spotlight, supra
note 4, at 4, 11.
50 Id. at 12–13.
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when those interpretations conflict with
prominent promotional language or
other representations.51 There are no
countervailing benefits that outweigh
the injury to consumers or competition
of inducing consumers to use credit
cards with vague or fine-print
conditions that consumers cannot
reasonably understand.52
Inability To Redeem Rewards
Rewards program operators can also
commit unfair or deceptive acts or
practices when their customers lose
their points because redemption
procedures do not function properly. In
offering rewards programs, operators
make representations to consumers
about how rewards can be redeemed,
often developing online interfaces for
consumers to use to redeem rewards. A
rewards program operator is accordingly
responsible for administering the
rewards program it offers, including
coordinating with its merchant partners
or vendors, so that consumers can
redeem the rewards that they have
earned and selected in accordance with
the rewards program.53
If systems failures result in consumers
losing points when attempting to
redeem, it may result in a deceptive
practice because consumers would
typically have a basis to reasonably
believe they were purchasing products
or services with their points, which
would be false as a result of the failure.
It would likely also be unfair because
ddrumheller on DSK120RN23PROD with RULES1
51 For
instance, consumer complaints indicate
rewards program operators may interpret as
impermissible ‘‘gaming’’ or ‘‘churning’’ consumer
card usage behaviors that are otherwise permissible
under cardholder agreements and satisfy objective
sign-up promotion criteria, such as closing an
account after spending the required amount for a
promotional rewards bonus. See id. at 14.
52 Notably, as with devaluation, the rewards
program operators have already benefitted from the
consumer spending on the relevant card by the time
they deny the rewards benefits.
53 Cf. In re UniRush and Mastercard Int’l Inc., No.
2017–CFPB–0010 (Feb. 1, 2017) (consent order)
(finding that failures to adequately test and
administer prepaid card program conversion were
unfair acts or practices), https://files.consumer
finance.gov/f/documents/201702_cfpb_UniRushMastercard-consent-order.pdf. See also CFPB v.
Ocwen Financial Corp., No. 17–80495–CIV, 2019
WL 13203853 at *30 (S.D. Fla. Sept. 5, 2019)
(finding that the CFPB sufficiently alleged CFPA
violations regarding add-on products even where
add-on vendor was responsible for enrolling
borrowers to such add-on products); see also, e.g.,
FTC v. Bay Area Bus. Council, Inc., 423 F.3d at 630
(affirming district court ruling that multiple
interrelated corporate and individual defendants
were liable under section 5 of FTC Act for deceptive
telemarketing scheme); FTC v. Neovi, 604 F.3d at
1155 (‘‘a single violation of the [FTC] Act may have
more than one perpetrator’’) (citing Bay Area).
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consumers would incur injury as a
result of the loss of rewards, with no
ability to avoid the harm and no
countervailing benefits that outweigh
the injury. Even if a rewards program
operator ultimately refunds unredeemed
points to a consumer, the consumer may
be harmed by the consumer’s inability
to redeem points in the interim,54 and
often consumers end up expending
significant time and resources trying to
obtain the refund.55 Consumers cannot
reasonably avoid these harms as they do
not have control over operators’ rewards
program administration, including
procedures for redeeming points or
converting them for use with co-brand
or merchant partners.
Again, the CFPB emphasizes that
covered persons that offer, provide, or
operate credit card rewards programs
may commit an unfair or deceptive act
or practice when the loss of points due
to failures of redemption procedures
could arguably be attributed to a
merchant partner or service provider.
For instance, a covered person may be
liable for an unfair or deceptive act or
practice when a consumer attempts to
transfer rewards points from the online
portal of such covered person to the
points portal of a merchant partner (e.g.,
requests a ‘‘conversion’’ of credit card
rewards points to points at a travel
partner), but technical failures on the
merchant partner’s system result in the
consumer losing the points.
About Consumer Financial Protection
Circulars
Consumer Financial Protection
Circulars are issued to all parties with
authority to enforce Federal consumer
financial law. The CFPB is the principal
Federal regulator responsible for
administering Federal consumer
financial law, see 12 U.S.C. 5511,
including the Consumer Financial
Protection Act’s prohibition on unfair,
deceptive, and abusive acts or practices,
12 U.S.C. 5536(a)(1)(B), and 18 other
‘‘enumerated consumer laws,’’ 12 U.S.C.
5481(12). However, these laws are also
enforced by State attorneys general and
State regulators, 12 U.S.C. 5552, and
prudential regulators including the
Federal Deposit Insurance Corporation,
54 See Credit Card Rewards Issue Spotlight, supra
note 4, at 19 (‘‘the ultimate value to consumers [of
converting rewards points to miles or hotel points]
depends on a quick and accurate conversion’’).
55 See id. at 17 (complaints received by CFPB
indicate consumers spend time trying to resolve
rewards issues through ‘‘repeated calls, hours on
hold, and thorough documentation of the problem
at hand’’).
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106281
the Office of the Comptroller of the
Currency, the Board of Governors of the
Federal Reserve System, and the
National Credit Union Administration.
See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for
banks and credit unions with $10
billion or less in assets). Some Federal
consumer financial laws are also
enforceable by other Federal agencies,
including the Department of Justice and
the Federal Trade Commission, the
Farm Credit Administration, the
Department of Transportation, and the
Department of Agriculture. In addition,
some of these laws provide for private
enforcement.
Consumer Financial Protection
Circulars are intended to promote
consistency in approach across the
various enforcement agencies and
parties, pursuant to the CFPB’s statutory
objective to ensure Federal consumer
financial law is enforced consistently.
12 U.S.C. 5511(b)(4).
Consumer Financial Protection
Circulars are also intended to provide
transparency to partner agencies
regarding the CFPB’s intended approach
when cooperating in enforcement
actions. See, e.g., 12 U.S.C. 5552(b)
(consultation with CFPB by State
attorneys general and regulators); 12
U.S.C. 5562(a) (joint investigatory work
between CFPB and other agencies).
Consumer Financial Protection
Circulars are general statements of
policy under the Administrative
Procedure Act. 5 U.S.C. 553(b). They
provide background information about
applicable law, articulate considerations
relevant to the Bureau’s exercise of its
authorities, and, in the interest of
maintaining consistency, advise other
parties with authority to enforce Federal
consumer financial law. They do not
restrict the Bureau’s exercise of its
authorities, impose any legal
requirements on external parties, or
create or confer any rights on external
parties that could be enforceable in any
administrative or civil proceeding. The
CFPB Director is instructing CFPB staff
as described herein, and the CFPB will
then make final decisions on individual
matters based on an assessment of the
factual record, applicable law, and
factors relevant to prosecutorial
discretion.
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2024–30988 Filed 12–27–24; 8:45 am]
BILLING CODE 4810–AM–P
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- CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Rules and Regulations]
[Pages 106277-106281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30988]
[[Page 106277]]
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CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Chapter X
Consumer Financial Protection Circular 2024-07: Design,
Marketing, and Administration of Credit Card Rewards Programs
AGENCY: Consumer Financial Protection Bureau.
ACTION: Consumer financial protection circular.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection Circular 2024-07 titled, ``Design,
marketing, and administration of credit card rewards programs.'' In
this circular, the CFPB responds to the question, ``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?''
DATES: The CFPB released this circular on its website on December 18,
2024.
ADDRESSES: Enforcers, and the broader public, can provide feedback and
comments to [email protected].
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation & Guidance Program Analyst, Office of Regulations, at
202-435-7700 or at: https://reginquiries.consumerfinance.gov/. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
Question Presented
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?
Response
Yes. 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.
This circular provides some 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, where: (1) the redemption values of rewards
that consumers have already earned or purchased are devalued; (2)
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 (3) 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.
Background on Credit Card Rewards Programs
Rewards programs are increasingly used to encourage consumers to
apply for and use specific credit cards.\1\ As of 2019, more than 90
percent of general purpose credit card spending occurred on rewards
cards, and by the end of 2022, 75 percent of general purpose credit
cards were rewards cards.\2\ While rewards cards are more common for
consumers with higher credit scores, the use of rewards cards is
growing fastest among deep subprime, subprime, and near-prime
consumers.\3\ The amount of money or value that consumers earn and
maintain in credit card rewards programs is also large and has
increased substantially in recent years. For example, in 2022,
consumers earned more than $40 billion in rewards from major general-
purpose credit cards, more than a 50 percent increase from 2019.\4\
Consumer rewards balances at the end of 2022 were more than $33
billion, up 40 percent relative to the fourth quarter of 2019.\5\ More
consumers are also using rewards to make payments, including for day-
to-day purchases and necessary expenses.\6\
---------------------------------------------------------------------------
\1\ See CFPB, The Consumer Credit Card Market (Oct. 2023)
(hereinafter ``2023 Report'') at 98, https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf. An industry survey found that rewards and
cash back programs were the top reason why consumers chose one card
over another, as well as the top reason consumers cited for
increasing spending on credit cards over the last six months. PYMNTS
and Elan, Credit Card Use During Economic Turbulence (Dec. 2023),
https://www.pymnts.com/wp-content/uploads/2023/05/PYMNTS-Credit-Card-Use-During-Economic-Turbulence-May-2023.pdf. See also Arielle
Feger, Cash-back rewards drive consumers to open new credit cards,
eMarketer (Mar. 26, 2024), https://www.emarketer.com/content/cash-back-rewards-drive-consumers-open-new-credit-cards; Drazen Prelec,
How credit cards activate the reward center of our brains and drive
spending, MIT Sloan (June 9, 2021), https://mitsloan.mit.edu/experts/how-credit-cards-activate-reward-center-our-brains-and-drive-spending.
\2\ 2023 Report at 99. One study also found that between 2021
and 2023, while total credit card applications decreased by 2
percent, applications for rewards cards and rewards cards with
tiered earnings grew by 5 percent and 8 percent, respectively.
Marketa Canayaz, Consumer Demand for Rich Rewards Rises, Comscore
(July 17, 2024), https://www.comscore.com/Insights/Blog/Consumer-Demand-for-Rich-Rewards-Rises.
\3\ 2023 Report at 100. See also Electronic Payments Coalition,
New Study Shows LMI Households Rely on Credit Card Rewards,
Electronic Payments Coalition (Apr. 30, 2024), https://electronicpaymentscoalition.org/2024/04/30/new-study-data-shows-credit-card-rewards-are-a-lifeline-for-working-class-americans/.
Despite the growth in the use of rewards cards among consumers with
lower credit scores, in many cases, these consumers do not benefit
from these rewards programs, and research has shown that consumers
with higher credit scores generally benefit from credit card rewards
programs at the expense of consumers with lower credit scores. See
Sumit Agarwal, et al., Who Pays for Your Rewards? Redistribution in
the Credit Card Market (Dec. 5, 2022), https://dx.doi.org/10.2139/ssrn.4126641.
\4\ CFPB, Credit Card Rewards (May 2024) (hereinafter ``Credit
Card Rewards Issue Spotlight'') at 9, https://files.consumerfinance.gov/f/documents/cfpb_credit-card-rewards_issue-spotlight_2024-05.pdf.
\5\ 2023 Report at 100. Notably, consumers also forfeit about
$500 million in rewards each year. Id. at 102.
\6\ See Rimma Kats, Survey Highlights Growing Consumer Appetite
for Paying with Points, Payments Journal (Jan. 3, 2024), https://www.paymentsjournal.com/survey-highlights-growing-consumer-appetite-for-paying-with-points/ (noting that a majority of consumers favor
redeeming their points at grocery stores, online retail outlets, and
at gas stations). See also Chase Survey Reveals How Credit Card
Rewards Are Enhancing The Holiday Season, Chase Media Center (Nov.
20, 2023), https://media.chase.com/news/chase-holiday-rewards-survey
(noting that during the holiday season, 33 percent of consumers
planned to use rewards to pay for gifts and 25 percent on groceries
for holiday meals). See, e.g., Bilt, How do I redeem points towards
a down payment?, https://support.biltrewards.com/hc/en-us/articles/10377953401869-How-do-I-redeem-points-towards-a-down-payment.
---------------------------------------------------------------------------
Credit card rewards programs are typically structured around
earning rewards ``currencies''--most commonly ``miles'' or other units
of value issued by a co-brand partner (such as an airline or
hospitality chain) or, alternatively, a credit card issuer's own
``points.'' \7\ Consumers typically earn miles or points through credit
card spending or by directly purchasing them in accordance with pre-
determined formulas, or ``earn rates.'' \8\ Many issuers also offer
promotional rewards through things like sign-up bonuses and
referrals.\9\
---------------------------------------------------------------------------
\7\ See Agarwal supra note 4, at 8. In 2021, more than one in
three general purpose credit cards offered were co-branded. See 2023
Report at 25. In addition to rewards currencies and cash back,
rewards programs also increasingly offer other affiliated benefits
or lifestyle rewards, such as access to airport lounges and priority
boarding. Credit Card Rewards Issue Spotlight at 8.
\8\ See CFPB, The Consumer Credit Card Market at 212-13 (Dec.
2015), https://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf.
\9\ See id. at 213.
---------------------------------------------------------------------------
Once earned or purchased by consumers, points can be redeemed for
rewards like ``cash back'' (statement
[[Page 106278]]
credits or direct deposits) or transfers to a co-brand or merchant
partner (e.g., miles or merchant-specific gift cards), and also for
other types of goods or services, like buying merchandise, donating to
charities, applying to purchases at check out, and others.\10\ However,
both credit card issuers and loyalty programs generally reserve, and
often assert a right to, unilaterally change the value of rewards,
including at the point of redemption.\11\ Reward points or miles
valuation changes can sometimes be tied to price changes in the
underlying product or service for which the reward is being redeemed
(e.g., changes in flight pricing), but program operators also adjust
rewards redemption rates distinct from underlying prices, apparently as
a means to ``preserve'' or ``maintain'' profit margins.\12\
---------------------------------------------------------------------------
\10\ Credit Card Rewards Issue Spotlight, supra note 4, at 7.
Both quantitative and qualitative evidence indicate consumers spend
across months or years to earn sufficient points or miles for
infrequent large purchases. See, e.g., id. at 15; 2023 Report at
100.
\11\ See, e.g., American Express, Membership Rewards Program
Terms and Conditions, https://rewards.americanexpress.com/myca/loyalty/us/catalog/tandc (last accessed Sept. 4, 2024); Citi, Citi
ThankYou Rewards Terms & Conditions, https://www.thankyou.com/cms/thankyou/tc.page?pageName=tc (last accessed Sept. 4, 2024); Chase,
Chase Sapphire Preferred[supreg] with Ultimate Rewards[supreg]
Program Agreement, https://www.chase.com/sapphire/rewardsagreement
(last accessed Sept. 4, 2024); Wells Fargo, Wells Fargo
Rewards[supreg] Program Terms and Conditions and Addendum, https://consumercard.wellsfargorewards.com/#/tnc (last accessed Sept. 4,
2024); Southwest, What are the Rapid Rewards Rules and Regulations,
https://support.southwest.com/helpcenter/s/article/rapid-rewards-rules-and-regulations (last accessed Sept. 4, 2024) Emily McNutt,
Delta is making it more expensive to earn elite status--here's how
you can bypass the new requirements, CNN (Aug. 28, 2023), https://www.cnn.com/cnn-underscored/travel/delta-airlines-status-requirements-update; Sean Cudahy, Alaska Airlines raises lounge
membership prices, tightens access, The Points Guy (Nov. 9, 2023),
https://thepointsguy.com/news/alaska-lounge-restrictions/; Zach
Griff, Why United's increased status thresholds might not be as bad
as they seem, The Points Guy (Nov. 11, 2022), https://thepointsguy.com/news/united-premier-changes-not-so-bad/.
\12\ See, e.g., United Airlines, MileagePlus Investor
Presentation, at 23 (June 15, 2020) (MileagePlus program can
``adjust[ ] award pricing based on expected foregone revenue for
United''), https://ir.united.com/static-files/1c0f0c79-23ca-4fd2-80c1-cf975348bab9; Delta Airlines, Delta Air Lines SkyMiles Investor
Presentation, at 17 (Sept. 14, 2020) (dynamic pricing model of
SkyMiles rewards program allows ``flexibility to control costs and
preserve margins''), https://www.sec.gov/Archives/edgar/data/27904/000119312520244688/d27099dex991.htm; American Airlines, American
Airlines AAdvantage Investor Presentation, at 22, 35 (Mar. 2021)
(AAdvantage ``control[s] the `exchange rate' between miles and
dollars,'' which provides flexibility to ``manage costs'' and
``steer reward demand to optimal flights based on cash displacement
risk.''), https://www.sec.gov/Archives/edgar/data/6201/000000620121000022/aainvestorpresentation.htm.
---------------------------------------------------------------------------
As the market for credit card rewards programs has grown, so too
has their complexity.\13\ Rewards program operators often assert their
ability to unilaterally modify credit card rewards programs, which has
caused at least one State to take action to provide consumers with
additional protections against such unilateral program
modifications.\14\ Additionally, the number of consumer complaints that
the CFPB receives about credit card rewards programs has also risen
dramatically in recent years.\15\ Many consumers' complaints describe
how the marketing or initial offering of a rewards program is
inconsistent with their actual, later experiences earning and redeeming
credit card rewards. For instance, consumers have complained to the
CFPB about companies devaluing their rewards relative to what they were
marketed, or increasing barriers to redeeming cash or cash-equivalent
rewards, such as eliminating the ability for consumers to redeem points
for a statement credit.\16\
---------------------------------------------------------------------------
\13\ See Jamie Lauren Keiles, The Man Who Turned Credit-Card
Points Into an Empire, The New York Times (Jan. 5, 2021), https://www.nytimes.com/2021/01/05/magazine/points-guy-travel-rewards.html
(how ``as rewards programs have multiplied, the earned point has
grown increasingly complex and fungible''); Credit Card Rewards
Issue Spotlight, supra note 4, at 6.
\14\ See Credit Card Rewards Issue Spotlight, supra note 4, at
11, 20; New York General Business Law Sec. 520-e (2023).
\15\ In 2023, there was a more than 70 percent increase in
complaints involving credit card rewards over pre-pandemic levels.
Credit Card Rewards Issue Spotlight, supra note 4, at 2.
\16\ See, e.g., id. at 15, 16.
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Consumers have also complained about being denied access to
promotional or other rewards because of terms or other requirements
hidden in their cardholder or rewards program agreements, including
instances of unexpectedly being found ineligible after applying for a
credit card \17\ or being forced to return a promotional offer because
they closed their account within a certain period.\18\ For many of
these types of complaints, companies and merchant partners justified
revoking, canceling, or preventing consumer access to rewards through
requirements and guidelines absent from their marketing materials and
only found buried in their cardholder or rewards program agreements.
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\17\ See, e.g., id. at 13.
\18\ See, e.g., id. at 15.
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Consumers have also repeatedly alerted the CFPB about difficulties
redeeming their rewards or inexplicably seeing their points disappear.
These reported challenges include issues with customer service,\19\
technical failures,\20\ and dispute resolution,\21\ all of which can be
further compounded when neither the issuer nor its merchant partner
accept responsibility and both refer consumers to the other.\22\
Because of these issues, some consumers have seen their rewards
disappear when being transferred or applied to a merchant partner, with
little recourse to resolve such problems.\23\
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\19\ See, e.g., id. at 17.
\20\ See, e.g., id. at 18.
\21\ See, e.g., id.
\22\ See, e.g., id.
\23\ See, e.g., id. at 19.
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Analysis
The CFPA prohibits any ``covered person'' or ``service provider''
from ``committing or engaging in an unfair, deceptive, or abusive act
or practice under Federal law in connection with . . . the offering of
a consumer financial product or service.'' \24\ An act or practice is
unfair when: (1) it causes or is likely to cause substantial injury to
consumers that is not reasonably avoidable by consumers and (2) such
injury is not outweighed by countervailing benefits to consumers or to
competition.\25\ Substantial injury includes monetary harm, and may be
based on likely rather than actual injury.\26\ In general, an injury is
not reasonably avoidable if consumers cannot reasonably anticipate the
injury, or when there is no way to avoid the injury even if it is
anticipated.\27\
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\24\ 12 U.S.C. 5531(a); see also 12 U.S.C. 5536(a)(1)(B).
\25\ 12 U.S.C. 5531(c)(1).
\26\ See, e.g., FTC v. Wyndham Worldwide Corp., 799 F.3d 236,
246 (3d Cir. 2015).
\27\ See FTC v. Neovi, Inc., 604 F.3d 1150, 1158 (9th Cir. 2010)
(interpreting whether consumer's injuries were reasonably avoidable
under the FTC Act); Orkin Exterminating Co. v. FTC, 849 F.2d 1354,
1365-66 (11th Cir. 1988) (same); Am. Fin. Servs. Ass'n v. FTC, 767
F.2d 957, 976 (D.C. Cir. 1985) (same).
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Under the CFPA, a representation, omission, or practice is
deceptive if it is likely to mislead a reasonable consumer and is
material.\28\ Representations, omissions, or practices are ``material''
if they ``involve[ ] information that is important to consumers and,
hence, likely to affect their choice of, or conduct regarding, a
product.'' \29\ In assessing the meaning of a communication, the CFPB
looks to its overall, net impression; in other words, the CFPB
considers the entire advertisement, transaction, or course of dealing
rather than evaluating
[[Page 106279]]
statements in isolation.\30\ A misrepresentation can be ``an express or
implied statement [that is] contrary to fact.'' \31\ It may also be
deceptive, for example, when a seller partially discloses information
about the nature of a product or service, but fails to disclose other
material information.\32\ Further, ``[w]ritten disclosures or fine
print may be insufficient to correct a misleading representation.''
\33\
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\28\ See CFPB v. Gordon, 819 F.3d 1179, 1192-93 (9th Cir. 2016).
\29\ Novartis Corp. v. FTC, 223 F.3d 783, 786 (D.C. Cir. 2000)
(quoting In re Cliffdale Assocs., Inc., 103 FTC 110, 165 (1984)).
\30\ See, e.g., CFPB v. Aria, 54 F.4th 1168, 1173 (9th Cir.
2022); Gordon, 819 F.3d at 1193; FTC v. E.M.A. Nationwide, Inc., 767
F.3d 611, 631 (6th Cir. 2014); Fanning v. FTC, 821 F.3d 164, 170
(1st Cir. 2016).
\31\ FTC, Policy Statement on Deception (Oct. 14, 1983).
\32\ See, e.g., Sterling Drug, Inc. v. FTC, 741 F.2d 1146, 1154
(9th Cir. 1984) (advertisements referring to ``unique formula'' were
deceptive because they could lead consumers to infer that pain
reliever's formulation was something other than ordinary aspirin);
see also FTC v. Bay Area Business Council, Inc., 423 F.3d 627, 635
(7th Cir. 2005) (``[T]the omission of a material fact, without an
affirmative misrepresentation, may give rise to an FTC Act
violation.'').
\33\ FTC, Policy Statement on Deception (Oct. 14, 1983).
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Rewards programs are a feature common to many credit cards, and
tend to both be prominently marketed by issuers and widely used by
consumers.\34\ Credit card rewards programs also play a major role in
consumer's choices on which cards to apply for and use for any given
transaction.\35\
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\34\ In 2022, rewards card spending was 90 percent of all
consumer spending on general purpose credit cards. CFPB, The
Consumer Credit Card Market, at 99 (Oct. 2023), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf. See also Background on Credit Card Rewards
Programs, supra.
\35\ Id. at 98. Because credit card rewards programs are offered
or provided ``in connection'' with a consumer financial product or
service (the extension of credit to consumers), the ``covered
persons'' or ``service providers'' who offer, provide, or support
such programs (hereinafter ``rewards program operators'') must
comply with the CFPA, including its prohibitions against unfair,
deceptive or abusive acts or practices, as well as other applicable
consumer financial protection laws. In the typical case, a credit
card issuer providing the rewards program would be a ``covered
person,'' while ``service providers'' could include the partners or
vendors that provide material services on the rewards program in
connection with the credit card program, such as co-brand or
merchant partners that deliver applicable rewards, or vendors who
operate the key infrastructure or platforms for consumers to view,
manage, and use their rewards earnings. See 12 U.S.C. 5481(6),
5481(26)(A).
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The CFPB is issuing this circular to underscore that the CFPA's
prohibition on unfair or deceptive acts or practices applies to the
design, marketing, and administration of credit card rewards
programs.\36\ Rewards program operators may violate this prohibition in
a variety of circumstances regardless of whether they are taking
actions consistent with rewards program terms. In particular, rewards
program operators risk committing unfair or deceptive acts or practices
when (1) rewards that consumers have already earned are devalued; (2)
consumers' receipt of rewards is revoked, cancelled, or prevented based
on buried or vague conditions; and (3) rewards points are deducted
without consumers receiving the corresponding benefit of the rewards.
These examples are illustrative and non-exhaustive.
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\36\ While not specifically discussed in this circular, rewards
program operators must also comply with the CFPA's prohibition on
abusive acts or practices, 12 U.S.C. 5531(d), which provides that an
act or practice is abusive if it (1) materially interferes with a
consumer's ability to understand a term or condition of a consumer
financial product or service or (2) takes unreasonable advantage of
the consumer's (a) lack of understanding of the material risks,
costs, or conditions of the product or service; (b) inability to
protect their interests in selecting or using a consumer financial
product or service; or (c) reasonable reliance on a covered person
to act in the consumer's interests.
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As described further below, the CFPB emphasizes that covered
persons that offer, provide, or operate credit card rewards programs
may be liable for an unfair or deceptive act or practice where some of
the conduct in question may be attributable to a third party or service
provider, such as a merchant partner.\37\
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\37\ See, e.g., CFPB v. Ocwen Fin. Corp., No. 17-80495-CIV, 2019
WL 13203853 at *30 (S.D. Fla. Sept. 5, 2019) (finding that the CFPB
sufficiently alleged CFPA violations regarding add-on products even
where add-on vendor was responsible for enrolling borrowers to such
add-on products); see also, e.g., FTC v. Bay Area Bus. Council,
Inc., 423 F.3d at 630) (affirming district court ruling that
multiple interrelated corporate and individual defendants were
liable under section 5 of FTC Act for deceptive telemarketing
scheme); FTC v. Neovi, Inc., 604 F.3d 1150, 1155 (9th Cir. 2010)
(``a single violation of the [FTC] Act may have more than one
perpetrator'') (citing Bay Area).
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Devaluation of Rewards Already Earned or Purchased
Rewards program operators may commit an unfair or deceptive act or
practice when they materially reduce the overall value of rewards that
consumers have already earned or purchased. Consumers make decisions on
whether to open or use a credit card based on the explicit and implicit
representations about the value of card benefits and rewards. For
instance, consumers' reasonable expectations about the value of rewards
may be informed by advertisements at account opening, as well as by
redemption values of rewards communicated to consumers on or around the
time the consumer makes decisions to purchase goods with the card and
accrue rewards benefits. Furthermore, fine print disclaimers or
contract terms stating that rewards program operators have the right to
adjust rewards offerings often will not be sufficient to correct
consumers' net impression about the expected value of rewards.
When rewards operators influence consumers' expectations about the
value of rewards in their product or marketing efforts (e.g., to
support customer acquisition, retention, or increased purchase volume),
but later make decisions to deflate the overall value of accrued
rewards, they may have engaged in actions that resemble a traditional
``bait-and-switch'' scheme.\38\ These activities may constitute unfair
or deceptive acts or practices under the CFPA.\39\
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\38\ See 16 CFR 238 et seq., FTC Guides Against Bait
Advertising. Cf. Rossman v. Fleet Card (R.I.) Nat. Ass'n, 280 F.3d
384, 396-400 (3d Cir. 2002) (credit card issuer soliciting business
with no-annual-fee offer while intending to later impose fee
constitutes a bait-and-switch scheme).
\39\ Cf. 24. FR 9755 (Dec. 4, 1959) (noting that FTC enforcement
actions with respect to bait-and-switch schemes are brought under
the FTC Act's prohibition on ``unfair or deceptive acts or
practices''); 32 FR 15540 (Nov. 8, 1967) (similar); Synopsis of
Federal Trade Commission Decisions Concerning ``Bait and Switch''
Sales Practices (Sept. 23, 1975) (``The Federal Trade Commission has
determined that `bait and switch' practices are unfair or deceptive
trade practices and are unlawful under Section 5(a)(1) of Federal
Trade Commission Act.''), https://www.ftc.gov/system/files/ftc_gov/pdf/NOPO-Bait-and-Switch.pdf.
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Enforcers investigating potentially unfair or deceptive acts or
practice should consider a variety of different devaluation tactics by
rewards program operators. Unfair or deceptive devaluations are easier
to detect when the rewards program involves simple, fixed redemption
rates with one retailer or merchant partner. But such schemes may be
harder to detect where there are numerous potential rewards available
or rewards program operators implement more complex program changes.
For example, if a rewards program operator uses dynamic pricing for
rewards redemptions, enforcers can examine whether the firm is unfairly
or deceptively devaluing points over time by considering, for example,
whether the dynamic prices in points have increased, in aggregate,
relative to dynamic cash prices for the same products or services.
Similarly, if a rewards program includes redemption options from
multiple participating merchant partners, and the rewards program
operator loses a major merchant partner or a major partner materially
downgrades the service provided, enforcers can look to whether the
rewards program operator is taking reasonable measures to generally
maintain the value of rewards, such as by increasing points usable at
other merchant partners, allowing customers to cash out points,
replacing lost rewards with other rewards, or by other
[[Page 106280]]
means. Additionally, when two firms merge, resulting in a conversion of
one firm's customers into a new rewards program, enforcers can look at
whether the resulting firm took actions to convert customers' points to
the new system without a reduction in points value.\40\
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\40\ See, e.g., U.S. DOT, USDOT Requires Alaska and Hawaiian
Airlines to Preserve Rewards Value, Critical Flight Service as
Merger Moves Forward (Sept. 2024), https://www.transportation.gov/briefing-room/usdot-requires-alaska-and-hawaiian-airlines-preserve-rewards-value-critical-flight (in connection with regulatory merger
approvals, Department of Transportation imposed ``rewards
protections against devaluation,'' including requiring each earned
loyalty program be converted to new program miles at 1:1 ratio and
prohibiting ``any actions that would devalue HawaiianMiles miles'').
The merger approval and requirements were based on ``[p]ublic
interest criteria [that] include preventing unfair, deceptive,
predatory or anticompetitive practices. . . .'' Id.
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In any investigation into whether a rewards program operator has
engaged in an unfair or deceptive devaluation scheme, enforcers are
encouraged to collect and consider accounting or other metrics
maintained by program operators or others regarding rewards values. For
example, many companies maintain internal figures on the dollar value
of outstanding rewards for accounting purposes, including an estimated
cost-per-point or weighted average redemption cost.\41\ If a firm's
cost-per-point or weighted average redemption cost decreases over time,
that could suggest a firm has engaged in a bait-and-switch or similar
unfair or deceptive act or practice.
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\41\ See, e.g., Capital One Financial Corporation, Annual Report
(Form 10-K) (Feb. 24, 2023) (``We use the weighted-average
redemption cost during the previous twelve months, adjusted as
appropriate for recent changes in redemption costs, . . . to
estimate future redemption costs.''). Similarly, informational
websites aimed at consumers may also estimate rewards point values.
See, e.g., The Points Guy, TPG launches new data-driven valuations
for 6 major US airlines--and updates methodology for credit card
currencies (Sept. 8, 2023), https://thepointsguy.com/news/new-data-driven-valuations/.
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The CFPB emphasizes that covered persons that offer, provide, or
operate credit card rewards programs may be liable for an unfair or
deceptive act or practice even when the material devaluation of rewards
could arguably be attributed to the actions of a third party. In other
words, if a covered person that offers, provides, or operates a credit
card rewards program makes explicit or implicit representations about,
and thereby induces consumer expectations regarding, the value of the
card benefits or rewards, and the value of those benefits or rewards is
subsequently materially reduced by actions that may be attributable to
the covered person's merchant partner, the covered person may be liable
for an unfair or deceptive act or practice.
Hidden Conditions
Rewards program operators also risk committing unfair or deceptive
acts or practices when they revoke or cancel rewards, or prevent the
award of rewards, based on buried or vague conditions.\42\ Rewards
programs have become increasingly complex, with lengthy terms and
unintuitive restrictions that consumers may not be aware of as they use
their credit cards day to day. These lengthy terms may use buried or
vague conditions set by rewards program operators that are non-
negotiable and may not be consistent with prominent promotional
language advertising the rewards that consumers can earn. As noted
above, consumer complaints received by the CFPB suggest that, despite
descriptions in the fine print of rewards program terms, consumers
often do not understand the basis of many rewards forfeitures or
denials.
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\42\ Additionally, rewards program terms that include unlawful
or unenforceable conditions may violate the CFPA's prohibition on
deceptive acts or practices. CFPB Circular 2024-03, Unlawful and
unenforceable contract terms and conditions (June 2024), https://www.consumerfinance.gov/compliance/circulars/consumer-financial-protection-circular-2024-03/. For example, the recently enacted New
York statute referenced above may render certain terms in rewards
program deceptive with respect to New York residents.
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The following are illustrative examples of potentially unfair
rewards program practices:
Revoking or canceling rewards based on vague catch-all
language in program terms, such as ``gaming'' or ``abuse.'' This can be
especially problematic when those terms are also subject to the rewards
program operator's discretion.\43\
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\43\ See Credit Card Rewards Issue Spotlight, supra note 4, at
14.
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Revoking previously earned rewards based on policies that
tie revocation to actions that are not within the consumer's control
and do not constitute fraud or misconduct by the consumer, like an
issuer unilaterally closing an account.\44\
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\44\ Id. at 20.
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Promotional ``sign-up'' offers that are denied based on
hidden conditions that consumers were not reasonably aware of, such as
``churning'' conditions that restrict how frequently a consumer can
earn sign-up rewards, time periods to earn rewards that are effectively
shortened by the hidden and unavoidable period of time needed to
receive and activate a card, or promotional offers that are unavailable
for applicants through certain channels.
These sorts of dark patterns and fine print will often constitute
deceptive representations, omissions, or practices about material
concerns, and thus violate the prohibition on deceptive practices.\45\
In addition, denying or preventing rewards based on buried or vague
terms could cause a substantial monetary injury in the form of lost
rewards value and may be unfair.\46\ These injuries may not be
reasonably avoidable by consumers where conditions are buried or vague,
and accordingly hinder consumers' ability to make a ``free and informed
choice.'' \47\ Specifically, consumers cannot reasonably avoid injuries
where they are not ``adequately informed'' of key conditions or
presented such information in a confusing way.\48\ As noted above,
rewards program operators typically promote most prominently the
availability of rewards, even more so than other key credit card terms,
such as APR or annual fees, while putting conditions around rewards in
fine print.\49\ Consumers may not understand the restrictive
eligibility criteria buried in the fine print where program operators
send marketing materials that target rewards promotions to the specific
consumers.\50\ Similarly, a consumer may be confused by the way a
rewards program operator interprets vague catch-all language, such as
terms restricting rewards based on impermissible ``gaming'' or
``abuse,''
[[Page 106281]]
when those interpretations conflict with prominent promotional language
or other representations.\51\ There are no countervailing benefits that
outweigh the injury to consumers or competition of inducing consumers
to use credit cards with vague or fine-print conditions that consumers
cannot reasonably understand.\52\
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\45\ See FTC, Bringing Dark Patterns to Light, at 7 (Sept. 2022)
(``Some dark patterns operate by hiding or obscuring material
information from consumers, such as burying key limitations of the
product or service in dense Terms of Service documents that
consumers don't see before purchase.''), https://www.ftc.gov/system/files/ftc_gov/pdf/P214800%20Dark%20Patterns%20Report%209.14.2022%20-%20FINAL.pdf. Cf. FTC v. Amazon.com, 2024 WL 2723812 at *1 (W.D.
Wash. 2024) (denying motion to dismiss of claims brought under
Section 5 of the FTC Act and the Restore Online Shoppers' Confidence
Act based on defendants ``trick[ing], coerc[ing], and manipulat[ing]
consumers . . . by failing to disclose the material terms of the
subscription clearly and conspicuously and by failing to obtain
consumers' informed consent before enrolling them''); FTC v.
Publishers Clearing House LLC, No. 23-CV-4735 (E.D.N.Y. June 6,
2023) (complaint) (alleging defendant ``employs dark patterns
throughout the consumer's experience by, among other things . . .
placing disclosures in small and light font and in places where a
consumer is unlikely to see them'').
\46\ CFPB research suggests consumers lose hundreds of millions
of dollars in earned rewards each year. 2023 Report, at 102.
\47\ See FTC v. Neovi, 604 F.3d at 1158; Am. Fin. Servs. Ass'n
v. FTC, 767 F.2d at 976.
\48\ See, e.g., FTC v. Commerce Planet, Inc., 878 F. Supp. 2d
1048, 1079 (C.D. Cal. 2012) (consumers could not reasonably avoid
injury where sign-up pages did not adequately disclose negative
option plan by burying in separate fine print disclosures).
\49\ Credit Card Rewards Issue Spotlight, supra note 4, at 4,
11.
\50\ Id. at 12-13.
\51\ For instance, consumer complaints indicate rewards program
operators may interpret as impermissible ``gaming'' or ``churning''
consumer card usage behaviors that are otherwise permissible under
cardholder agreements and satisfy objective sign-up promotion
criteria, such as closing an account after spending the required
amount for a promotional rewards bonus. See id. at 14.
\52\ Notably, as with devaluation, the rewards program operators
have already benefitted from the consumer spending on the relevant
card by the time they deny the rewards benefits.
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Inability To Redeem Rewards
Rewards program operators can also commit unfair or deceptive acts
or practices when their customers lose their points because redemption
procedures do not function properly. In offering rewards programs,
operators make representations to consumers about how rewards can be
redeemed, often developing online interfaces for consumers to use to
redeem rewards. A rewards program operator is accordingly responsible
for administering the rewards program it offers, including coordinating
with its merchant partners or vendors, so that consumers can redeem the
rewards that they have earned and selected in accordance with the
rewards program.\53\
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\53\ Cf. In re UniRush and Mastercard Int'l Inc., No. 2017-CFPB-
0010 (Feb. 1, 2017) (consent order) (finding that failures to
adequately test and administer prepaid card program conversion were
unfair acts or practices), https://files.consumerfinance.gov/f/documents/201702_cfpb_UniRush-Mastercard-consent-order.pdf. See also
CFPB v. Ocwen Financial Corp., No. 17-80495-CIV, 2019 WL 13203853 at
*30 (S.D. Fla. Sept. 5, 2019) (finding that the CFPB sufficiently
alleged CFPA violations regarding add-on products even where add-on
vendor was responsible for enrolling borrowers to such add-on
products); see also, e.g., FTC v. Bay Area Bus. Council, Inc., 423
F.3d at 630 (affirming district court ruling that multiple
interrelated corporate and individual defendants were liable under
section 5 of FTC Act for deceptive telemarketing scheme); FTC v.
Neovi, 604 F.3d at 1155 (``a single violation of the [FTC] Act may
have more than one perpetrator'') (citing Bay Area).
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If systems failures result in consumers losing points when
attempting to redeem, it may result in a deceptive practice because
consumers would typically have a basis to reasonably believe they were
purchasing products or services with their points, which would be false
as a result of the failure. It would likely also be unfair because
consumers would incur injury as a result of the loss of rewards, with
no ability to avoid the harm and no countervailing benefits that
outweigh the injury. Even if a rewards program operator ultimately
refunds unredeemed points to a consumer, the consumer may be harmed by
the consumer's inability to redeem points in the interim,\54\ and often
consumers end up expending significant time and resources trying to
obtain the refund.\55\ Consumers cannot reasonably avoid these harms as
they do not have control over operators' rewards program
administration, including procedures for redeeming points or converting
them for use with co-brand or merchant partners.
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\54\ See Credit Card Rewards Issue Spotlight, supra note 4, at
19 (``the ultimate value to consumers [of converting rewards points
to miles or hotel points] depends on a quick and accurate
conversion'').
\55\ See id. at 17 (complaints received by CFPB indicate
consumers spend time trying to resolve rewards issues through
``repeated calls, hours on hold, and thorough documentation of the
problem at hand'').
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Again, the CFPB emphasizes that covered persons that offer,
provide, or operate credit card rewards programs may commit an unfair
or deceptive act or practice when the loss of points due to failures of
redemption procedures could arguably be attributed to a merchant
partner or service provider. For instance, a covered person may be
liable for an unfair or deceptive act or practice when a consumer
attempts to transfer rewards points from the online portal of such
covered person to the points portal of a merchant partner (e.g.,
requests a ``conversion'' of credit card rewards points to points at a
travel partner), but technical failures on the merchant partner's
system result in the consumer losing the points.
About Consumer Financial Protection Circulars
Consumer Financial Protection Circulars are issued to all parties
with authority to enforce Federal consumer financial law. The CFPB is
the principal Federal regulator responsible for administering Federal
consumer financial law, see 12 U.S.C. 5511, including the Consumer
Financial Protection Act's prohibition on unfair, deceptive, and
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws
are also enforced by State attorneys general and State regulators, 12
U.S.C. 5552, and prudential regulators including the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the National
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for banks and credit unions with $10
billion or less in assets). Some Federal consumer financial laws are
also enforceable by other Federal agencies, including the Department of
Justice and the Federal Trade Commission, the Farm Credit
Administration, the Department of Transportation, and the Department of
Agriculture. In addition, some of these laws provide for private
enforcement.
Consumer Financial Protection Circulars are intended to promote
consistency in approach across the various enforcement agencies and
parties, pursuant to the CFPB's statutory objective to ensure Federal
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).
Consumer Financial Protection Circulars are also intended to
provide transparency to partner agencies regarding the CFPB's intended
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C.
5552(b) (consultation with CFPB by State attorneys general and
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB
and other agencies).
Consumer Financial Protection Circulars are general statements of
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They
provide background information about applicable law, articulate
considerations relevant to the Bureau's exercise of its authorities,
and, in the interest of maintaining consistency, advise other parties
with authority to enforce Federal consumer financial law. They do not
restrict the Bureau's exercise of its authorities, impose any legal
requirements on external parties, or create or confer any rights on
external parties that could be enforceable in any administrative or
civil proceeding. The CFPB Director is instructing CFPB staff as
described herein, and the CFPB will then make final decisions on
individual matters based on an assessment of the factual record,
applicable law, and factors relevant to prosecutorial discretion.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-30988 Filed 12-27-24; 8:45 am]
BILLING CODE 4810-AM-P