By Rita R. Robison
Last week, the Consumer Financial Protection Bureau announced its first public enforcement action with an order requiring Capital One Bank to refund about $140 million to two million customers and pay an additional $25 million penalty.
The bureau identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards.
Its examiners discovered Capital One’s call-center vendors engaged in deceptive tactics to sell the company’s credit card add-on products.
Consumers with low credit scores or low credit limits were offered these products by Capital One’s call-center vendors when they called to have their new credit cards activated, the bureau said in a statement. As part of the high-pressure tactics Capital One representatives used to sell these add-on products, the bureau reported consumers were:
- Misled about the benefits of the products.
- Deceived about the nature of the products.
- Misled about eligibility.
- Misinformed about cost of the products.
- Enrolled without their consent.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the bureau has the authority to issue consent orders and take action against institutions engaging in unfair, deceptive, or abusive practices.
The bureau also is releasing two consumer advisories. One advisory is to make Capital One customers aware of its action and the other is a general warning to consumers about these types of deceptive practices.
While this action sends a clear signal to the banking industry that the new agency will step in and protect consumers, much more is needed from the Obama administration and Congress on bank regulations.
Bank regulations need to be toughened to prevent another financial meltdown. In addition, the bankers and other “captains of industry” who caused the Great Recession need to be charged and brought to trial.
Consumers have suffered greatly through foreclosures of their homes, loss of their jobs, and reductions in their retirement funds.
While as gratifying as this first action by the new consumer protection financial bureau is, along with this year’s earlier settlement on mortgage foreclosure irregularities by other agencies, the banking industry and Wall Street investment companies need to be held accountable for their crimes.