Thus far, the Consumer Financial Protection Bureau (CFPB) has done a lot of watching and waiting, taking consumer complaints and issuing decrees about the close microscope they planned to put the credit card industry under. While this may have led many to conclude that the new financial watchdog lacked teeth, just ask Capital One about its bite.
On July 18, the CFPB ordered that Capital One, the sixth largest credit card issuer in the US, refund $140 million to approximately 2 million consumers who purchased account add-ons such as payment protection and credit monitoring as well as pay a $25 million penalty. The punishment was handed down in conjunction with the Office of the Comptroller of the Currency (OCC), which itself added $10 million in restitution payments and $35 million in penalties to Capital One’s aforementioned tab. That’s $210 million altogether!
This was an important event not only because it was the CFPB’s first public enforcement action, but also because it drew increased attention to some of the most predatory actions being taken against some of the most vulnerable consumers.
According to the CFPB, Capital One call center operators engaged in a number of improprieties designed to enroll customers with low credit scores or credit limits in costly “services,” whether or not they were eligible or the programs were even relevant to their situations. Capital One’s idea of customer service apparently included:
- Lying to customers: The CFPB found that CapOne routinely used misinformation as a sales technique, claiming that their services would help improve credit scores and increase spending power when they wouldn’t, insinuating that these services were mandatory and free when they were truly optional and for a charge, and leading consumers to believe they were eligible for benefits only to leave them unable to garner coverage once a policy was in effect.
- Enrolling them without consent: If customers wouldn’t take the bait, Capital One personnel would simply take matters into their own hands, enrolling them for services they’d have to pay for on a monthly basis.
- Making services difficult to cancel: Capital One, doing its best mob impression, made it difficult for consumers to extricate themselves from unwanted services.
The manipulation and bullying of vulnerable customers are the last things we need on the road to economic recovery, especially in light of the role anti-consumer tactics played in exponentially worsening people’s already damaged financial situations prior to and during the Great Recession. The CFPB’s punishments reflect this. They’re not just about money, you see. In addition to paying back those who either enrolled in credit monitoring or payment protection or tried to cancel their accounts since August 10, 2010 for fees, lack of coverage, and interest, Capital One must cease marketing these programs until they get a compliance plan approved by the CFPB as well as undergo an independent audit to make sure they are abiding by the watchdog’s directives.
This is somewhat akin to a college football program losing bowl eligibility and scholarships for a year or so while being put on probation. (There haven’t been any high-profile college football scandals recently, have there?)
Ultimately, the precedent set by the CFPB’s ruling will discourage bottom-line-conscious banks from undertaking similar anti-consumer business practices, and that’s just how the CFPB wants it (not to mention the rest of us who didn’t get any dough from this particular penalty). In addition, this incident is proof that the CFPB’s complaints system works given that these complaints served as the impetus for the CFPB’s investigations. Consumers now know that if a bank takes advantage of them, someone will be willing to listen.
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