The Consumer Financial Protection Bureau (CFPB) today has ordered Bank of America and FIA Card Services to pay $727 million in relief for allegedly practicing illegal credit card activity that affecting 1.4 million consumers.
During a press call Wednesday, the CFPB announced its enforcement action stemmed from what it believed to be Bank of America’s “deceptive marketing” related to credit card add-on products.
Additionally, the agency also alleged that Bank of America illegally charged approximately 1.9 million consumer accounts for credit monitoring and credit reporting services that they were not receiving.
The enforcement action notes that from 2010 through 2012, Bank of America marketed two credit card payment protection products called “Credit Protection Plus” and “Credit Protection Deluxe.”
The products allow customers to request that BofA cancel some amount of credit card debt in the event of “certain hardships” such as involuntary unemployment or disability, as well as certain life events like entering college or retirement.
CFPB alleged that both of these products contained misstatements in their telemarketing scripts and also included telemarketers strayed away from their scripts to make sales pitches that were misleading and that omitted important information.
Areas where BofA allegedly misled consumers include enrollment processes for these credit protection products where consumers agreed to receive additional information, but instead were being enrolled by the telemarketers and charged for the products.
Consumers also reported to the CFPB that BofA also misrepresented the benefits they could receive from the credit products.
“Telemarketers misled consumers by implying the benefits of these products were automatic upon notice of a qualifying event when, in fact, benefits were contingent on the successful completion of a benefit request submission and approval process,” the CFPB stated in a release.
Additional enforcement against BofA also includes allegations of unfair billing practices, where the bank billed consumers for add-on products related to identity protection either without or before having the authorization necessary to perform the credit monitoring and credit report retrieval services.
This segment alone resulted in about $459 million in harm to 1.5 million affected consumers between October 2000 through September 2011, the CFPB noted.
“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.”
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB also ordered Bank of America to pay a $20 million penalty to the agency’s Civil Penalty Fund on top of the $727 million in restitution.
In addition to these penalties, the Office of the Comptroller of the Currency has also ordered Bank of America to pay $25 million in civil money penalties for their unfair billing practices.
Written by Jason Oliva