by Michael Lacy and Scott Kelly
On April 9, 2014, the Consumer Financial Protection Bureau announced a $772 million deal with a large bank to settle allegations that it deceptively marketed credit card add-on products and illegally billed customers. The bank will refund $727 million to consumers and pay fines of $20 million and $25 million to the CFPB and Office of the Comptroller of the Currency, respectively.
From 2010 through 2012, a large bank actively marketed two credit card payment protection products, “Credit Protection Plus” and “Credit Protection Deluxe.” Both products allowed customers to request that the bank cancel some amount of credit card debt in the event of certain hardships like involuntary unemployment or disability and certain life events such as entering college or retirement. The CFPB found that the telemarketing scripts the bank used for these products contained misstatements. Additionally, telemarketers allegedly went off script to make sales pitches that were misleading and that omitted pertinent information. For example, one product was offered that would supposedly allow consumers to cancel up to 18 months of their minimum balance payment if they were admitted to a hospital, even for just a night, according to the CFPB. “In reality, a single night’s hospital stay would only entitle consumers who successfully navigated the large bank’s claims process to one month of benefits,” CFPB Director Richard Cordray stated.
Over 1.4 million card members were affected by the large bank’s deceptive marketing. Notably, the settlement is the fifth in a series of actions the CFPB has against credit card providers, which it claims has resulted in a total of $1.5 billion in refunds to consumers.
Read more at Consumer Financial Services Law Monitor by Troutman Sanders LLP.
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