BBB National Programs Archive

NAD Recommends Chase Bank Modify Claims for Cash-Back Rewards Card

New York, NY – Feb. 14, 2014 – The National Advertising Division has recommended that Chase Bank USA, NA, modify certain claims made for the company’s Chase Freedom Rewards Credit Card in broadcast and Internet advertising. The claims at issue were challenged by Capital One Bank (USA), NA.

NAD is an investigative unit of the advertising industry’s system of self-regulation. It is administered by the Council of Better Business Bureaus.

NAD examined the following express claim:

  •  “5% cash back”

NAD also explored whether the advertising at issue implied that the Chase Freedom Rewards Credit Card offered five percent cash back on all purchases without restriction.

NAD noted in its decision that Chase and Capital One both offer credit cards with rewards programs that provide cash back to consumers.

Capital One argued that Chase materially misrepresented the scope and value of its five percent cash-back rewards feature and contended that the advertising at issue left consumers with the impression that the Freedom card offers five percent cash back without material restriction when, according to the challenger, Chase’s five percent cash rewards are limited to bonus categories that rotate quarterly; require special activation quarterly; and have a $1,500 cap on combined purchases in the specified categories. Capital One noted that the maximum a customer could earn in cash-back awards was $75 a quarter.

Chase responded that its Freedom Card advertising clearly communicates the terms and material limitations of the card. According to the advertiser, the card offers consumers the ability to earn cash back of five percent on up to $1,500 spent in select categories which revolve each quarter, as well as one percent cash back on all other purchases.

Capital One commissioned a consumer-perception study that it contended provided evidence that consumers failed to notice and understand the limitations of the five percent cash-back offer in Chase television commercials. The double-blind mall intercept survey questioned consumers who either used a rewards credit card or were considering signing up for one within the next 12 months.

According to the challenger, the study showed that, of the 171 respondents who perceived the five percent cash-back claim in the commercial, 98 or 50.8 percent, interpreted it to mean cardholders earned five percent cash back on all purchases. Adjusted for noise, the survey’s author determined that net confusion was 35.3 percent.

NAD noted in its decision that Chase criticized several aspects of the consumer-perception survey, including the failure to include a control commercial, a flawed control question, as well as flawed and confusing survey questions.

Although NAD shared some of Chase’s concerns about the consumer perception study including the confusing nature of the questions and the lack of a control commercial, NAD’s independent review of the commercial led it to conclude that consumers could reasonably be confused regarding the material terms and limitations of Chase’s cash rewards card.

NAD recommended that the advertiser discontinue or modify its television advertisements to clearly and conspicuously disclose the material terms of the Chase Freedom 5% bonus rewards including:

  •  The bonus rewards require quarterly activation
  •  Are available for only a limited time in specified categories
  •  Are subject to a spending cap of $1500, and avoid simultaneous distracting audio and visuals.

Regarding Internet advertising, NAD further recommended that when Chase uses a hyperlink to disclosures in space-constrained advertisements like banners, the hyperlink indicate the nature of the disclosures to which it is linking.

Chase, in its advertiser’s statement, said the company appreciated NAD’s guidance regarding the need for additional disclosures in the challenged advertising.

The company noted that it respectfully disagreed that the 15-second spots at issue failed to convey the key limitations of the five-percent cash-back reward offer “in a meaningful fashion.”

Chase disagreed with NAD’s conclusions regarding its banner advertising and “believes that it fully complies with the relevant standards, including the FTC .Com Guidelines and the CARD Act.”

Finally, the company said, “Chase supports the self-regulatory process, and to enhance consumer transparency, Chase will take into account NAD’s recommendations in formulating future Chase Freedom 15-second spot and banner advertising that features the five-percent bonus.”