The Consumer Financial Protection Bureau (CFPB) has outlined its expectations for acceptable credit card marketing practices in the wake of its first enforcement action.
Last week, the agency fined Capital One $25 million and ordered the bank to refund $140 million to two million consumers who were misled into buying credit card add-on products such as payment protection, credit monitoring, and access to “credit education specialists.”
CFPB reports that as part of the “high-pressure tactics” Capital One used to sell these add-ons, consumers were:
►Misled about the benefits of the products. Consumers were led to believe the products would improve their credit scores and help them increase their credit limits.
►Deceived about the nature of the products. Consumers weren’t always told that buying the products was optional. In other cases, consumers were misinformed that they were required to purchase the product to receive full information about it, but they could cancel the product if they weren’t satisfied.
Many of these consumers later had difficulty canceling when they called to do so.
►Misled about eligibility. Although most of the payment protection benefits kicked in when consumers became disabled or unemployed, call center representatives marketed and sold the product to unemployed and disabled consumers whose claims would inevitably be denied.
►Misinformed about the cost. Consumers were led to believe they would be enrolling in a free product when that wasn’t the case.
►Enrolled without their consent. Consumers were automatically billed for products and often had trouble cancelling them.
The CFPB says institutions it supervises should market and sell credit card add-on products in a manner that limits the potential for statutory or regulatory violations and harm to consumers.
They should ensure that:
The CFPB considers these factors in evaluating the effectiveness of disclosures:
Click here for the full text of the CFPB’s consent order [pdf]