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CFPB Issues Bulletin on Marketing Credit Card Add-On Products

Concurrent with its enforcement action against Capital One, the CFPB issued a Bulletin on its expectations for the marketing of credit card add-on products, such as those at issue in the Capital One action. The Bulletin also warns institutions that the CFPB will take “all necessary steps to ensure that consumers are protected from deceptive sales and marketing practices, including those resulting from failures to adequately disclose important product terms and conditions, or other violations of Federal consumer financial law.” These include having a comprehensive compliance management program ensures that telemarketing and customer service scripts do not mislead or pressure consumers.

The Bulletin outlines a number of steps that CFPB-supervised institutions should take to ensure that they market and sell credit card add-on products in a way that limits the potential for statutory or regulatory violations and associated consumer harm. The Bulletin also lists a number of compliance management programs that should be employed by institutions offering credit card add-on products.

Although the Bulletin focuses on credit card add-on products, the CFPB notes that institutions should take this guidance into consideration when offering similar products in connection with other forms of credit or deposit services.

The Bulletin is available here.

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CFPB Issues First Enforcement Action

In its first public enforcement action, the Consumer Finance Protection Bureau (CFPB) found that Capital One Bank, (USA) N.A. engaged in deceptive marketing practices, which the CFPB says mislead customers into buying credit card “add-on products.” The large size of the total payment required under this action ($210 million) has raised speculation that the CFPB will be seeking larger penalties than bank regulators in the past, because such previous penalties have not stopped banks from using unfair tactics to seek profits.

The CFPB found through its supervision process that Capital One’s call-center vendors engaged in deceptive tactics to sell its credit card add-on products, which included payment protection plans, debt forgiveness and credit monitoring services. To activate newly issued credit cards, Capital One customers with low credit scores or low credit limits were directed to a third-party call center and subjected to “high-pressure [sales] tactics.” In particular, the CFPB found that Capital One customers were misled about the benefits of the add-on products, deceived about the nature of the products, mislead about eligibility, misinformed about the cost of the products and, in some cases, enrolled without their consent.

The CFPB’s enforcement action requires Capital One to cease all marketing of these products until the Bureau approves a compliance plan to help ensure against future violations; refund to 2 million customers approximately $140 million, which covers the cost of these add-on products as well as a refund of the finance charges associated with fees paid, any over-the-limit fees incurred and interest; pay claims denied based on ineligibility at enrollment; make convenient repayment to consumers; assure compliance with the terms of the consent order through the work of an independent auditor and pay a $25 million civil money penalty into the Bureau’s Civil Penalty Fund.

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