Today, Bank of America was ordered by the Consumer Financial Protection Bureau to refund $727 million to consumers who were deceived by the bank's marketing of credit card payment protection programs and others who were charged for credit monitoring services they never fully authorized. This makes the bank the fifth major credit card issuer to be financially penalized for these types of credit card practices.
In addition to the refunds, the Office of the Comptroller of the Currency fined Bank of America $25 million in civil penalties for unfair billing practices. The bank also has to pay $20 million to the CFPB Civil Penalty Fund.
The CFPB issued a consent order that showed over 1.4 million consumers were deceived by the marketing of two credit card payment protection programs. These products, called "Credit Protection Plus" and "Credit Protection Deluxe," allowed customers to request the bank cancel some credit card debt in the event of certain hardships like disability and involuntary unemployment, or certain life events such as retirement or entering college. The CFPB found that the telemarketing practices used in selling these products were misleading. This took place between 2010 and 2012.
Bank of America must provide approximately $268 million in refunds to the more than 1.4 million customers affected by these deceptive marketing practices.
In addition, Bank of America enrolled consumers in programs to monitor their credit and alert them to potentially fraudulent activity. These programs were known as "Privacy Guard," "Privacy Source," and "Privacy Assist." The bank began charging customers fees and interest without or before they received proper authorization from consumers.
Bank of America must pay $459 million to roughly 1.9 million customer accounts, representing approximately 1.5 million consumers who enrolled in the credit monitoring products and were charged while the bank did not perform all of the promised services.
"We have consistently warned companies about illegal practices related to credit card add-on products," said CFPB Director Richard Cordray in a statement. "Bank of America both deceived consumers and unfairly billed consumers for services not performed. We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market."
Federal regulators have been cracking down on deceptive credit card practices and marketing from many of the biggest card issuers in the United States in recent years.
In September 2013, the Bureau ordered JPMorgan Chase to refund $309 million to credit card customers that were improperly billed for add-on products. The CFPB and the Office of the Comptroller of the Currency concluded that 2.1 million cardholders were billed for services they never received. These add-on products included identity theft protection and fraud monitoring. Chase charged monthly fees ranging from $7.99 to $11.99. The investigation found that the company even charged customers for these services before the customers gave any authorization.
In October 2012, American Express was ordered to refund $85 million to
customers and pay $27.5 million in civil penalties to settle regulators' accusations that the company violated a number of consumer protection laws. The issuer led customers to believe they would receive $300 for signing up for the Blue Sky credit card. The customers who fulfilled the conditions of the offer never received the money. In addition, American Express was accused of making false statements to persuade customers to pay off their credit card balances. The regulators said customers were told that if they agreed to pay off part of their debt, the remaining portion of the balance would be forgiven.
In September 2012, the CFPB and the FDIC announced that Discover had to refund $200 million to their credit card customers for pressuring cardholders into buying expensive payment protection and credit monitoring services. Discover also had to pay a $14 million fine.
In July 2012, Capital One agreed to pay up to $150 million to two million consumers as a result of the bank's telemarketers deceptively pushing credit monitoring and payment protection services. In addition, Capital One agreed to pay fines of $25 million to the CFPB and $35 million to the Office of the Comptroller of the Currency.
– Bill Hardekopf is founder of Lowcards.com, an online credit-card information site.