In its very first enforcement action, the Obama administration’s Consumer Financial Protection Bureau ordered Capital One Bank to pay millions in refunds, fines and fees for sneaky customer service practices.
The CFPB is the first federal regulator of its kind because it is designed to protect consumers, rather than the health and profitability of banks. The new watchdog group subpoenaed account records, listened to recorded customer calls, reviewed call center scripts and interviewed managers about their practices.
The CFPB found that a third-party vendor of Capital One used heavy-handed tactics to convince customers to purchase extra products such as payment protection plans and credit monitoring programs. However, they purposefully targeted customers with subprime cards and lower credit limits.
For example, the representative would convince a customer who was simply calling to activate their card, that the “add-on” payment protection product would cover any bad credit card debt should they become ill or unemployed. The problem was, some of those customers were already jobless and never would have been able to collect on a claim.
The new federal oversight agency slapped $210 million in refunds and regulatory fines on the country’s fifth largest bank. $150 million will be refunded to consumers who were bullied into purchasing the bogus products between august of 2010 and January of this year.
The CFPB will receive $25 million for financial education programs and to refund victims of consumer abuse. The remaining $35 million will go to the Office of the Comptroller of the Currency, a separate federal agency that supervises all national banks and federal savings associations.
The CFPB said additional announcements regarding other companies would be forthcoming. Some companies already admitted to investigations and changing their practices to be in compliance with the new regulator’s parameters.
If you are having trouble paying off your credit card debt, you may have been duped by your credit card company. Find out if you are eligible for a refund or bankruptcy by visiting our Burlington County, New Jersey, bankruptcy web page.