The Consumer Financial Protection Bureau announced July 18 its first public enforcement action, requiring Capital One Bank, N.A., to refund approximately $140 million to two million customers and to pay an additional $25 million penalty. CFPB says the bank’s call center vendors used deceptive marketing tactics to pressure or mislead consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards.
Capital One has agreed to cease all marketing of these products, and will not resume doing so until it submits a compliance plan, acceptable to the CFPB. Capital One will repay consumers who either initially enrolled in a product on or after August 1, 2010, or who tried to cancel a product on or after that date but were persuaded to keep the product after speaking with a call center representative. In addition to the amount paid for the product, card-holders will receive a refund of the associated finance charges, any over-the-limit fees resulting from the charge for the product, and interest.
Capital One Bank is not the only organization to be reprimanded for sales tactics surrounding payment protection plans. The Minnesota Attorney General brought a lawsuit against Discover Bank last year over a similar issue. The lawsuit alleged that Discover charged some people’s credit cards for enrollment in optional financial products like “payment protection,” “identity theft protection,” “wallet protection,” and “credit score tracker,” even though they did not knowingly agree to purchase anything.
The case was settled last fall, and the state of Minnesota is attempting to distribute the $2 million penalty it collected from Discover. Customers who were unknowingly charged for the “add-on” services are eligible to file a claim.
In the Capital One case, any eligible consumers whose payment protection claims were previously denied because their loss occurred prior to enrollment (because of unemployment, disability, etc.), Capital One will pay their claims as if they had been eligible, if that amount is greater than the refund for that consumer.
The action is being taken in coordination with the Office of the Comptroller of the Currency, which is separately ordering restitution from Capital One. The OCC’s order includes separate restitution for additional consumers harmed by unfair billing practices taking place between May 2002 and June 2011. The OCC is assessing a $35 million civil money penalty against Capital One.