On December 18, the CFPB issued a circular titled “Consumer Financial Protection Circular 2024-07,” which provided an analysis of whether credit card issuers and their partners may violate federal consumer protection law by devaluing or obstructing access to credit card rewards. The circular, which was addressed to all parties with authority to enforce federal consumer financial law, including other federal agencies, state regulators, and private plaintiffs, detailed several scenarios where the CFPB asserted possible CFPA violations.

The circular addressed situations where credit card issuers devalue rewards that consumers have already earned or purchased, particularly when consumers decided on whether to open or use a credit card based on representing the card’s benefits and rewards. The circular asserted these practices resemble a “bait and switch” scheme if credit card issuers make representations about the value of rewards at account opening that are undercut by subsequent practices devaluing accrued rewards. The Bureau noted that fine print disclaimers allowing rewards program operators to change reward offerings does not correct this misrepresentation, since such disclaimers are not sufficient to make consumers aware of the terms of the rewards program. The circular noted that such practices may constitute a violation of the CFPA as unfair or deceptive acts or practices.

The circular also explained that practices of revoking or canceling earned rewards based on hidden or vague conditions may also constitute an unfair or deceptive act or practice. The circular noted that rewards programs often include complex terms and conditions that are not disclosed prominently, which can mislead consumers if those terms are used to cancel rewards to which the consumer would otherwise be entitled to. As examples of potentially unlawful conduct, the circular described practices of revoking or canceling rewards based on vague language in program terms such as “gaming” or “abuse” or revoking rewards based on actions outside the consumer’s control, such as an issuer unilaterally closing an account.

Finally, the circular examined instances where consumers are unable to redeem rewards due to system failures of the card issuers or rewards program operator. The circular made clear if consumers lose points or rewards due to system failures preventing redemption of those rewards, there may be a violation of the CFPA since consumers may be harmed by the inability to redeem earned points (even if the points are eventually refunded) and consumers have no control over the administration of the rewards program. In the case of system failures, the circular argued that companies offering reward programs may be liable for actions by third parties, emphasizing that these companies responsible for ensuring systems and redeeming rewards are functional for consumers, including coordination with vendors as necessary to avoid technical failures in a partner’s system.