Finance

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Does Your Cash Back Card Pay You Back Like This?

In 2019, Capital One ran a TV commercial with a woman claiming she redeemeded $115,000 in cash back rewards in just one year with her Spark business credit card.

*MOUSE PRINT:

The unreadable fine print says:

The actual amount of cash back will depend on your credit limit, payment history and purchase activity.

Well, this person must have one heck of a credit limit to have earned $115,000 with her two-percent cash back card. In fact, she would have had to have put $5,750,000 on the card that year to earn that kind of rebate.

Fast forward to 2021. Capital One is running a new commercial with another business owner claiming he redeemed $21,000 in cash back last year.

This time the fine print has changed, is more readable, and remains on the screen longer.

*MOUSE PRINT:

Rewards depicted represent higher than average rewards for customers with this card and were accumulated over multiple years. The actual amount of cash back will depend on your credit limit, payment history and purchase activity.

Nonetheless, his very words, “last year, I redeemed $21,000 in cash back… seriously, $21,000” imply that that is what he earned that year when in fact he did not.

We asked Capital One why they continue to advertise what we believe to be misleading cash back claims.

A spokesperson for Capital One replied:

“[Both] commercials speak to redemption stories rather than rewards earned in any particular period, [and] the Happy Howie’s disclosure does further clarify that the rewards themselves were earned over multiple years…”

This implies that the woman in the flowers commercial also earned her $115K over many years.

In not so many words, the spokesperson also referenced a case brought against the bank by Chase on these very issues. In the 2020 decision of the National Advertising Division (NAD) of the Better Business Bureau, the bank was told the fine print on the first commercial was unlikely to be noticed or understood. It also found that the examples shown could not be achieved by over 90% of their cardholders, and that the ad did not state the typical results an average cardholder could expect.

You can judge whether the disclosure the bank made in the second commercial above (which was created after the NAD decision) complied with the recommendations made.

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When You Stop Saving With Savings Bonds

Remember when U.S. savings bonds were a popular gift? You could give someone a $50 savings bond, but only pay $25 for it. It would grow over time to eventually reach the face value. Savings bonds have fallen out of favor by most investors because of very low interest rates and their long maturity periods.

Recently, MrConsumer finally decided it was time to cash in some old savings bonds from 1966, 1969, and 1995. He had long since forgotten which savings bonds continued to earn interest and which did not. As it turns out, that was an expensive lesson to learn.

US savings

*MOUSE PRINT:

The series “E” bonds from the mid-60s stopped earning interest after 30 years. This means that while the $25 bond pictured above actually was worth just over $123, it hasn’t earned a penny of interest since the mid-90s — some 24 years ago. Duh.

And a $100 series “EE” saving bond from 1995, which still had five more years until it matures, was only worth $111.56 due to a variable interest rate of only 1.02-percent currently.

So take a tip from this experience — check the value of your savings bonds with this handy tool and quickly cash in those that mature and stop earning interest.

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Scammers Rake in Millions But Only Have to Repay Thousands When Caught

The federal Consumer Financial Protection Bureau (CFPB) announced a series of proposed settlements it made with several companies that had been accused of charging upfront fees to students when signing up to use their debt relief services. However, under the telemarketing sales rule, a fee can only be charged after a debt is settled or renegotiated.

In total, these companies (along with two others who have not agreed to settle) allegedly collected more than $11.8 million in illegal fees. And while the settlements call for judgments in the full amount of money improperly collected, the amount of restitution and civil penalties that these companies actually have to pay may leave you speechless.

*MOUSE PRINT:

In one case, where the full $11.8 million was assessed against this particular defendant, here is all it has to repay:

… full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 14 of this Section and …

14. Within 10 days of the Effective Date, Defendant must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $25,000 in partial satisfaction of the judgment as ordered in Paragraph 13 of this Section.

And to add insult to injury, here is the amount of civil penalties the company has to pay for violating the law.

*MOUSE PRINT:

…by reason of the violations of law alleged in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant must pay a civil money penalty of $1 to the Bureau. This amount is based on Defendant’s limited ability to pay as attested to in his financial statements listed in Section VIII above.

One dollar? That’s the penalty for this multimillion dollar violation?

According to the CFPB, what defendants are required to pay is based on their current financial condition. So $25,000 is all the bureau is requiring. But what about that measly dollar in fines? According to the law, as long as the CFPB assesses even the most minimal of fines — like $1 — that will entitle the bureau to pay some amount of additional restitution to aggrieved consumers taken from their Civil Penalty Fund (a victim compensation fund). It has not yet been determined if each victim will be made whole. (The CFPB failed to provide us even with a sense of what percentage of their losses victims historically are able to collect from the fund.)

It is unfortunately too typical that victims get ripped off, and the alleged masterminds of these schemes get to pocket most of the money even after being caught.