First Public Enforcement Action by US Consumer Financial Protection Bureau
On 18 July 2012, the US Consumer Financial Protection Bureau (CFPB) announced that it had reached a settlement with Capital One Bank (USA) (Capital One) in relation to alleged misleading or deceptive conduct in credit card marketing (see press release here). This is the first public enforcement action taken by the CFPB since it was established in 2010. The settlement secured refunds for approximately 2 million affected consumers, totalling US $140 million. As part of the settlement, Capital One has also agreed to pay US $35 million to the Comptroller of Currency and $25 million to the CFPB.
CFPB alleged that Capital One’s call-centre operators engaged in a range of misleading or deceptive practices to sell credit card “add-on” products to customers with low credit scores or low credit limits. (The add-ons consisted of services such as payment protection and credit monitoring). According to CFPB, Capital One’s conduct included:
- Misleading consumers about the benefits of the products (suggesting that the add-ons would improve their credit scores);
- Deceiving consumers about the nature of the products (failing to disclose the fact that the add-ons were optional);
- Misleading consumers about eligibility (offering products that protected consumers in the event of unemployment or disability to customers who were already unemployed or disabled and therefore ineligible for the add ons);
- Misinforming consumers about the cost of the products (falsely suggesting that the products were free)
- Enrolling consumers without their consent (customers were automatically billed without signing up for the products).