US regulators investigate credit card rewards 'bait and switch' schemes

Federal officials on Thursday announced that they are investigating "bait and switch" schemes associated with credit card rewards and travel programs.   

The Consumer Financial Protection Bureau (CFPB) analyzed "several hundred consumer complaints" that are related to the administration of credit card rewards programs. In its analysis, the agency said it identified four recurring issues that resulted in consumers either not receiving the rewards they were promised, facing unexpected promotional conditions, seeing a devaluation in their points, having redemption problems and even revocation.

"Credit card companies promise upfront benefits for signing up and using their rewards card, but often bury complex terms in the fine print for using the rewards," CFPB Director Rohit Chopra said.

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Customers have told the CFPB that requirements detailed in the fine print of rewards programs’ terms and conditions do not match marketing materials, which turns "sign-up offers or other promotional rewards into a ‘bait and switch,'" the agency said.

Customers also issued complaints that issuers and merchant partners have devalued rewards that customers already earned by either increasing the number of points or miles needed for a redemption.

In September, for instance, Delta Air Lines CEO Ed Bastian announced that the carrier is updating its frequent flyer program after recent changes, which made it harder to earn elite status.

Additionally, customers told the CFPB that they are not protected from rewards program partner decisions to remove benefits from rewards programs or increase requirements for achieving status either. 

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The CFPB said credit card companies often use rewards programs as "bait and switch" by burying terms in vague language or fine print and changing the value of rewards after people sign up and earn them.

Problems are then only exacerbated by the growth of co-branded credit cards and rewards programs, where consumers can transfer miles or points to merchants, the CFPB said. 

The agency said it is investigating ways to "protect people's points, stop bait-and-switch scams" while also promoting "a fair and competitive market for credit card rewards."

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The CFPB said it's already "taken action" against issuers like American Express and Bank of America for "engaging in unfair, deceptive, or abusive acts or practices related to rewards programs." 

FOX Business reached out to American Express and Bank of America for comment.