Capital One Bank has agreed to pay $210 million to settle federal charges that it tricked credit card customers into buying costly add-on services like payment protection and credit monitoring. Most of the money will go directly to refund customers who were led to believe the services were free or mandatory or offered more benefits than they did. The order against Capital One is the first enforcement action by the Consumer Financial Protection Bureau, which was set up a year ago to protect consumers from excessive or hidden fees and other financial threats. Hopefully, this is a preview of what we can expect from the Bureau in the future.
Under its agreement with the CFPB, Capital One will pay about $150 million to 2.5 million customers and will pay an additional $25 million penalty. Capital One will also pay a $35 million penalty to the Office of the Comptroller of the Currency, a separate federal agency, which has the responsibility to oversee its banking operations. The refunds will go to customers who bought add-on card services between August 2010 and January 2012. They will receive the full amount of fees they paid and any other related costs.
The charges were based on the consumer bureau’s findings that Capital One’s call-center vendors were “deceptive” in selling the add-on services. The CFPB can charge companies engaged in “unfair, deceptive or abusive practices” and that’s good for all consumers and would also help businesses that don’t cheat their customers.
In a statement, Richard Cordray, the agency’s director, said the agency is “putting companies on notice that these deceptive practices are against the law and will not be tolerated.” Ryan Schneider, Capitol One card division president, not only agreed to settle, but also in a statement apologized to customers. He admitted that Capital One is “accountable for actions that vendors take” on its behalf. The consumer bureau, which was created under the Obama Administration’s financial overhaul law, is the first federal regulator focused on protecting consumers, rather than on just making sure that banks are stable and profitable. I believe that’s a very good thing for the American people.
Source: Associated Press
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