The Consumer Financial Protection Bureau announced it ordered Bank of America and FIA Card Services to pay $727 million in relief to the 1.4 million consumers harmed by practices related to the company’s deceptive marketing of credit card add-on products such as identity theft protection and programs that are supposed to help cardholders who lose their jobs. As an additional punishment, the company must also pay a $20 million civil money penalty to the CFPB.
“We have consistently warned companies about illegal practices related to credit card add-on products,” Richard Cordray, CFPB Director, says in a news release. “Bank of America both deceived consumers and unfairly billed consumers for services not performed. We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market.”
Wednesday’s announcement comes less than a week after it was reported that Bank of America and CFPB officials were discussing a deal to resolve the issues.
A CFPB investigation found that from 2010 through 2012 Bank of America deceptively marketed two credit card payment protection products, Credit Protection Plus and Credit Protection Deluxe, to consumers.
The products allowed consumers to request that the bank cancel some amount of credit card debt in the event of certain hardships including involuntary unemployment or disability or life events such as entering college or retirement.
Telemarketing transcripts pertaining to the products contained several misstatements, and telemarketers often made sales pitches that were misleading and omitted pertinent information, the CFPB reports.
Issues with the marketing of the products included misleading or omitted information about the cost of the first 30 days of coverage, enrollment process for credit protection products and benefits of credit protection products.
When marketing the products Bank of America led some customers to believe that the first 30 days of coverage was free of charge. However, by enrolling, consumers were agreeing to purchase the credit protection products and would begin incurring charges unless they canceled within an initial 30-day review period.
Consumers were also misled about the enrollment process for the products, often being told there were additional steps to enroll in or purchased the products after completing the marketing call. In reality, consumers were enrolling in the products during the call and were then charged for the products.
Consumers who purchased the products believe they would receive benefits for a longer period of time than was allowed under the terms and conditions. Some consumers believed they would be entitled to a “$25,000 death benefit” by enrolling in Credit Protection Plus when that was not the case.
Additionally, telemarketers misled consumers by implying the benefits of these products were automatic upon notice of a qualifying event when, in fact, benefits were contingent on the successful completion of a benefit request submission and approval process.
In addition to misleading information about credit protection programs, Bank of America was found to have illegally charged 1.9 million consumer accounts for credit monitoring and credit reporting series they were not receiving.
Consumers were enrolled in identity protection credit card add-on products that promised to monitor customer credit and alter consumers to potentially fraudulent activity. The products are known as Privacy Guard, Privacy Source and Privacy Assist.
Bank of America billed consumers for these products without or before having the authorization necessary under federal law to perform the credit monitoring and credit report retrieval services. As a result, the company billed consumers for services they did not receive, unfairly charged consumers for interest and fees, illegally charged 1.9 million consumer accounts and failed to provide product benefits.
To ensure that Bank of America honors its obligations to provide relief to consumers, CFPB orders the company to prohibit from engaging in illegal activities, end unfair practices, repay affected consumes and pay the $20 million civil penalty to the CFPB’s Civil Penalty Fund.
CFPB has also made similar deals with Capital One and Discover over these upsold credit card add-ons, for $150 million and $200 million, respectively.
CFPB Orders Bank Of America To Pay $727 Million In Consumer Relief For Illegal Credit Card Practices [Consumer Financial Protection Bureau]