The National Advertising Division (NAD) in a case involving cashback rewards for credit card holders recently reaffirmed that advertisers must disclose any material limitations on a claim within the advertising itself even if consumers are provided with material or clarifying information at a later time.

In the dispute, Chase Bank USA LLC (Chase) challenged claims made in Discover Financial Services, LLC (Discover) about its 1 percent and 5 percent cashback programs. The disputed claims were:

• “Up to 1% cash back” on everyday purchases

• “Right now, all over the country, Discover customers are getting 5% Cashback bonus [in selected categories]”

Chase argued that Discover was advertising its 1 percent cashback without disclosing the materials terms of the offer. Notably, Chase pointed out that Discover customers had to spend $3,000 on qualifying purchases before they could obtain the 1 percent cashback. Until this $3,000 was spent, consumers only received 0.25% cashback. The NAD agreed with Chase, and it recommended that Discover modify its advertising to clearly and conspicuously disclose this material limitation.

Chase also challenged Discover’s advertising of its 5 percent cashback on purchases in select categories. Chase argued that Discover’s advertising led consumers to believe that the 5% cashback program was a permanent, long term benefit of the card. This consumer perception was incorrect as consumers are required to opt-in to the 5 percent cashback program every time a new promotion began. Discover’s advertisement included a general statement that “limitations apply”; however, the NAD said this was an insufficient method of putting consumers on notice to these material limitations. The NAD also was not persuaded by Discover’s argument that material terms were provided to a consumer through other means. The NAD recommended that Discover either discontinue the advertising campaign for the 5 percent cashback or modify it to disclose that consumers have to affirmatively sign up for the 5 percent cashback and the date or approximate duration of each promotional campaign.

For more information on this case, please contact Sarah Bruno or Matthew Mills.