CFPB Targets Credit Card Companies Over Deceptive ‘Shell Game’ Rewards Practices

The Consumer Finance Protection Bureau (CFBR) recently issued a statement warning credit card companies that they’re under increased scrutiny concerning growing allegations of obstruction and deception, The Washington Post reported.

Credit Card Issuers Urged To Deliver on Promises, End Bait-and-Switch Tactics

In a Dec. 18 statement delivered by the CFPB, the bureau suggested that many credit card issuers were engaging in potentially illegal behavior by devaluing rewards points or airline miles accrued by cardholders.

“Large credit card issuers too often play a shell game to lure people into high-cost cards, boosting their own profits while denying consumers the rewards they’ve earned,” said CFPB Director Rohit Chopra.

“When credit card issuers promise cashback bonuses or free round-trip airfares, they should actually deliver them. The CFPB is taking aim at bait-and-switch tactics and promoting more competition in credit card markets to protect consumers and give people more choice,” Chopra continued.

The CFPB noted a growing number of consumer complaints over the devaluation of points, as well as increased difficulties in trying to redeem points for promised rewards. Primary among the concerns exhibited by the bureau were:

• Devaluation of earned rewards: Given that consumers often agree to open up a credit card account after being given a sales pitch about the potential rewards, devaluation of the points accrued to gain these rewards represents a dishonest and misleading practice on behalf of card issuers.
• Small print woes: Small print disclaimers or vague language hidden deep within a contract may illegally conflict with bold promotional offers on the glossier side of advertising. Luring customers in with offers only to have several caveats or loopholes hidden in legalese somewhere deep in the text may represent an “unfair or deceptive act or practice,” per the CFPB.
• Failure to deliver on promised benefits: Making sure that credit card issuers and redemption partners live up to their end of the deal is paramount. Even if system failures remove points inadvertently, for example, issuers are responsible for ensuring remediation is made.

Retail Credit Cards Also a Pressing Issue, CFPB Responds by Launching Free Tool

The statement further drilled down into the problem of retail credit cards, which the CFPB claimed often carry higher interest rates than competing cards. These retail cards are often sold to customers based on the promise of significant rewards or loyalty benefits being attached.

“The CFPB found that retail cards — more than 80 percent of which are issued by four large banks — are more expensive than general purpose cards, with 90 percent of retail cards reporting a maximum annual percentage rate (APR) above 30 percent, compared to only 38 percent of non-retail general purpose cards in one CFPB survey sample. In December 2024, private label cards for the top retailers had an average APR of 32.66% for new accounts,” the press release stated.

Finally, as PYMNTS pointed out, rewards cards represent the vast majority of cards being issued at this point in time — and retail rewards cards continue to be popular. Further, the use of rewards cards is “growing fastest among deep subprime, subprime, and near-prime consumers,” or the most economically vulnerable Americans.

In response, the bureau launched Explore Credit Cards earlier this year, an informational tool designed to provide unbiased information to those interested in credit card options. The CFPB has compiled comprehensive data on more than 500 cards currently on the market, and users can take advantage of this free tool to make informed decisions when considering opening up a new credit card account.