RSSThe Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation announced Monday a joint public enforcement action requiring Discover Bank to refund $200 million to some 3.5 million customers. The regulatory agencies have also leveled a $14 million civil money penalty against the bank, which is a subsidiary of Discover Financial Services. Here is the joint press release.
This is the second major penalty leveled against a company by the CFPB. Earlier, the agency hit Capital One Financial Corp with a $210 million penalty. Click here for CFPB Journal coverage of that incident.
The regulatory agencies say Discover used deceptive marketing practices to sell payment protection products between Dec. 1, 2007 and Aug. 31, 2011. The regulators say language used by telemarketers was not clear, and that they spoke unusually fast when disclosing key provisions of the product.
“We want to make it more expensive to break the law than to abide by it,” said CFPB Enforcement Director Kent Markus in a news teleconference according to media reports.
Those same reports quote CFPB Director Richard Cordray saying: “We continue to expect that more such actions will follow.”
The regulatory action requires Discover to stop its deceptive marketing practices, pay restitution to consumers who purchased the product, provide refunds to those customers, submit to independent audits in the future to verify compliance with this enforcement action, and pay a civil money penalty consisting of $7 million to the CFPB and $7 million to the FDIC. Consumers will receive refunds for the affected purchased products. They paid anywhere from $2.99 to $9.99 per month for the products. All affected consumers will receive a minimum repayment equaling three months of fees.
Click here for the full text of the consent order.
