The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency recently issued a $210 million penalty to Capital One that includes fines and reimbursement for customers. The penalty was the result of parallel though collaborative investigations by the two agencies. Capital One will pay fines of $35 million and $25 million respectively to the OCC and the CFPB, and they will pay $150 million to more than 2.5 million customers who bought these “add-on” financial products
The lender, one of the six largest in the nation, had been investigated by both agencies because third-party vendors working for the bank were accused of pressuring and deceiving card members into paying sizable fees for services that did little to safeguard them, such as identity theft, unemployment and disability protection.
“We are accountable for the actions that vendors take on our behalf,” Ryan Schneider, president of Capital One’s card business, said in a statement. “These marketing calls were inconsistent with the explicit instructions we provided to agents for how these products should be sold. We apologize to those customers who were impacted, and we are committed to making it right.”
Victims will begin receiving settlement money, an average of less than $100 per person, later in the year. This follows a $13.5 million settlement Capital One reached with the attorney general of West Virginia earlier this year over its payment protection programs, as reported by the New York Times.
The settlement also requires the lender to stop marketing some of its add-on products and go through an independent audit of its practices.
But Capital One is not the only major lender to face these charges, the report said. Bank of America, JPMorgan Chase and HSBC were all sued in June by the Hawaii attorney general.
“We know these deceptive marketing tactics for credit card add-on products are not unique to a single institution,” said Richard Cordray, the director of the CFPB, in a statement posted to the CFPB’s website. “We expect announcements about other institutions as our ongoing work continues to unfold.”
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This is the first enforcement action coordinated by the country’s oldest financial regulator and its newest. The OCC was established by President Lincoln in 1863 and the CFPB celebrates its first birthday this weekend.
Image: taberandrew, via Flickr