On December 18, 2024, the Consumer Financial Protection Bureau (CFPB) issued Circular 2024-07, emphasizing the application of the Consumer Financial Protection Act (CFPA) to credit card rewards programs. The CFPA prohibits any "covered person" or "service provider" from engaging in unfair, deceptive or abusive acts or practices in connection with offering consumer financial products or services.

Application to Credit Card Rewards Programs:

The CFPB's circular underscores that these prohibitions apply to the design, marketing and administration of credit card rewards programs. Operators may violate these rules in several ways, including:

• Devaluation of Rewards: Reducing the value of rewards already earned, which can mislead consumers about the value of their rewards.
• Hidden Conditions: Revoking or preventing rewards based on vague or buried terms, which can cause substantial injury to consumers.
• Redemption Failures: Technical issues that prevent consumers from redeeming points, leading to unfair or deceptive practices even if points are eventually refunded.

Client Recommendations:

• Transparency: Clearly communicate all terms and conditions related to rewards programs. Avoid vague or hidden terms that could mislead consumers.
• Consistency: Ensure that marketing materials and account terms align with the actual value and redemption process of rewards.
• Technical Reliability: Maintain robust systems to prevent technical failures that could impede rewards redemption. Have clear procedures for addressing and compensating any issues that arise.
• Monitoring and Compliance: Regularly review and audit rewards programs to ensure compliance with CFPA guidelines. Be proactive in identifying and rectifying any practices that could be deemed unfair or deceptive.

By adhering to these recommendations, companies can mitigate the risk of violating CFPA regulations and maintain consumer trust in their rewards programs.