BBB National Programs Archive

NAD Recommends Discover More Clearly Disclose Limitations on Cash-Back Promotions

New York, NY – June 14, 2012 – The National Advertising Division has recommended that Discover Financial Services LLC either more clearly disclose the terms of its “5%” and “1%” cash-back programs or discontinue the advertising claims.

NAD is an investigative unit of the advertising industry’s system of self-regulation and administered by the Council of Better Business Bureaus.
Chase Bank USA, N.A., challenged before NAD claims made by Discover in broadcast advertising, including:

• “Right now, all over the country, Discover card customers are getting 5% Cashback bonus [in selected categories]” (i.e. at grocery stores, at the pump, at restaurants, on travel, etc.]”
• “Up to 1% cash back” on ordinary everyday purchases

Chase argued that Discover’s advertisements obscure critical terms of its cash rewards program.

Before determining the terms and conditions Discover might be asked to disclose, NAD assessed the messages conveyed by the advertising as a whole. NAD was concerned that Discover’s commercials could leave consumers with a fundamental misimpression: that the advertised 5% cash-back offer was a long-lasting benefit that was automatically conferred to all Discover card holders, rather than a temporary, opt-in promotion.

NAD disagreed with Discover’s contention that the 5% cash back commercials were directed primarily to existing Discover cardholders. NAD noted in its decision that television commercials are generally understood as messages to the public at large and that the majority of viewers – non-holders of Discover cards – could understand that the cash-back offered applied to them.

NAD concluded that these consumers could be misled by the unqualified “5% cash back” claim and recommended that Discover either discontinue the commercials or modify them by disclosing that the 5% program requires an opt-in and providing some indication of the promotion’s duration.

NAD next reviewed Discover’s claim that its customers receive “up to 1% cash back” on ordinary, everyday purchases. The question before NAD was whether an “appreciable number” of consumers under normal circumstances could obtain the 1% cash back rate.

Discover argued that all card holders are eligible to earn the 1% rate, as long as they meet the minimum spending requirements – $3,000 in qualifying purchases.

NAD recommended that Discover modify its “up to 1%” claim by clearly and conspicuously disclosing, in a manner that is easy for consumers to notice, read, and understand, that consumers must first spend $3,000 on qualifying purchases in order to obtain the 1% rate—and that prior to meeting this minimum spend requirement they earn a rate of 0.25%.

Discover, in its advertiser’s statement, said the company “appreciates the NAD’s thoughtful review of this matter and will modify its advertising accordingly.”