The Consumer Financial Protection Bureau says the barbarians and/or vikings at Capital One went too far in pressuring and misleading the bank’s credit card customers into paying for add-on products like payment protection and credit monitoring. Thus, around two million Cap One customers will be sharing in a refund of $140 million.
This is the first big-time enforcement action from the CFPB, which says that when some Capital One customers called up to activate their new cards, company reps would do everything they could to upsell them on unnecessary and unwanted services.
Among the CFPB’s allegations:
* Capital One misled customers about the benefits of the products:
Company reps would sometimes tell customers that these add-on services would improve their credit scores and help them increase the credit limit on their Capital One credit card.
*Deceived customers about the nature of the products:
Capital One staffers sometimes forgot to mention that these services were optional. In other cases, says the CFPB, “consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.”
Misled consumers about eligibility: Many of these so-called protection services are only intended to protect customers who lose their jobs or go on disability. Thus, customers who were already unemployed or on disability should not have been eligible. Yet, Capital One continued to enroll ineligible customers in these programs.
Misinformed customers about cost of the products: Some Cap One staffers led customers to believe the services were free.
Enrolled customers without their consent: Not only were some customers being enrolled without giving full consent, they also later had difficulty cancelling the services.
“Today’s action puts $140 million back in the pockets of two 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 CFPB Director Richard Cordray, taking time off from his duties as an NBC Studios page. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”
In addition to the $140 million refund, Capital One will pay a $25 million penalty for its transgressions.
The $140 million will go to all of the estimated two million consumers who either initially enrolled in one of these products on or after August 1, 2010, or who tried to cancel a product on or after August 1, 2010, but were persuaded to keep the product after speaking with a call center representative.
Affected customers will also receive a refund of the associated finance charges, any over-the-limit fees resulting from the charge for the product, and interest.
Current Capital One customers will see the refunds as a credit to their account. Those who have moved on from Cap One will get a check in the mail.
The CFPB says that affected customers don’t need to take any further action to receive the refunds, but here is a page with more information.