CFPB fines Capital One $210m for credit card add-ons
WASHINGTON — Capital One Financial Corp. will pay $210 million to settle charges of deceptive marketing of credit card ‘‘add-on’’ products such as payment protection and credit monitoring.
It was the first public enforcement case brought by the Consumer Financial Protection Bureau, established by the Dodd-Frank Act to increase oversight of consumer financial products. The bureau and the Office of the Comptroller of the Currency, the bank’s primary regulator, said Capitol One agreed to provide between $140 million and $150 million in restitution to 2 million customers and pay an additional $60 million in penalties to the federal agencies. — $25 million to thebureau and $35 million to the OCC.
The McLean, Va., company didn’t admit or deny wrongdoing.
‘‘Today’s action puts $140 million back in the pockets of 2 million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,’’ said bureau director Richard Cordray. ‘‘We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.’’
In a conference call with reporters, Cordray said that other card issuers who market similar products face enforcement actions as well.
‘‘We know these deceptive marketing tactics for credit card add-on products are not unique to a single institution,’’ Cordray said. ‘‘We expect announcements about other institutions as our ongoing work continues to unfold.’’
He also said the bureau would seek restitution in future enforcement actions. ‘‘We will insist on refunds for injured consumers,’’ Cordray said.
As part of the settlement, Capital One agreed not to market the add-on products until the bureau approves its plan for complying with the settlement, the bureau’s assistant director for enforcement, Kent Markus, told reporters. This is one reason why the bureau wasn’t concerned that Capital One didn’t admit wrongdoing, Cordray said.
The bureau said its examiners discovered that Capital One’s third-party vendors engaged in deceptive tactics to sell ancillary products to the company’s credit cards.
The products included ‘‘payment protection’’ that allows customers to cancel as many as 12 months of minimum payments if they face unemployment or temporary disability.
The vendors also sold credit-monitoring services, which promised identity-theft protection and access to ‘‘credit education specialists,’’ thebureau said.
Cordray said that customers were wrongly led to believe they needed to buy the services to activate their cards or that debt protection or credit monitoring was free, while others were left with the impression that the purchase would improve their credit scores. Some customers were simply not eligible, but got billed anyway.
Capital One said in a statement that it became aware of its vendors’ practices in late 2011.
‘‘We are accountable for the actions that vendors take on our behalf,’’ Ryan Schneider, president of Capital One’s card business, said in the statement. ‘‘These marketing calls were inconsistent with the explicit instructions we provided to agents for how these products should be sold. We apologize to those customers who were impacted and we are committed to making it right.’’
More cases against credit-card companies may be in the works. The Consumer Financial Protection Bureau and Federal Deposit Insurance Corp. have subpoenaed Discover Financial Services amid a probe into that lender’s marketing of fee-based products, including debt-protection, the company said in a June filing.
Debt-protection products, also known as credit insurance, are lucrative mainly because of limited competition. Customers can’t get a card from one company and credit insurance from another, according to consumer advocates.