When it comes to reining in the abusive practices of financial institutions, there is a new sheriff in town. It’s called the Consumer Financial Protection Bureau, and their sights seem clearly focused on abuses within the credit card industry. In July, the agency compelled Capital One to pay $210 million to settle charges that customers were deceived. In September, it forced Discover to pay $214 million dollars to over 3.5 million customers over similar charges. And more recently, American Express has agreed to a $111.5 million settlement, of which $85 million will go directly to affected customers.
But just because there is a new crackdown on credit card issuers doesn’t mean their customers should stop taking steps to protect themselves. In fact, there is much we can learn from these settlements to defend ourselves from similar abuses.
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1. Just say no. In the case of Capital One and Discover, the government alleges that these companies were pressuring cardholders to agree to payment protection products. These services result in additional charges being added to a cardholder’s bill every month. According to a 2011 report from the federal government’s General Accounting Office, “Fees for the nine largest credit card issuers’ debt protection products range from $0.85 to $1.35 per month for every $100 of the outstanding balance.” Yet consumers only received 21 cent in benefits back for each dollar spent on these programs. So when it comes to payment protection programs, simply decline — in no uncertain terms.
2. Scrutinize your bill. A common thread in both the Capital One and Discover settlements was customers had recurring monthly charges added to their credit card that they didn’t understand or didn’t want. In addition to payment protection programs, these charges included credit monitoring and fraud protection services. And while some cardholders probably noticed these additional charges and had them removed, the vast majority continued to pay for these optional charges. Only by examining your bill line by line, each month, can you know when to fight questionable charges.
3. Get everything in writing. In the case of American Express, the card issuer was accused of offering $300 in cash back as well as bonus points in return for opening an account. In fact, the offer was only for 22,500 bonus points which could then be redeemed for $300 cash back. Keep a copy of any offers you apply for that you received in the mail, and if you sign up for a credit card online, save an image of the offer including the fine print. Avoid applying over the telephone as there is little recourse when a representative misstates an offer.
4. Check your credit report. Another aspect of the American Express settlement was the accusation that it failed to properly report billing disputes to credit reporting agencies. Consumers should always scrutinize their credit reports and are entitled to request a free report at least once every 12 months from each of the major credit reporting agencies, or whenever they are denied credit. The only official site for these requests is AnnualCreditReport.com.
5. Fight back. Not many people are taking advantage of the Consumer Financial Protection Bureau complaint process. For example, in the month of June, only 137 credit card complaints were received by the Consumer Financial Protection Bureau. So clearly, adding your voice to their database can have an enormous affect. To file an official complaint with the CFPB, click here or call them at (855) 411-2372.
Credit card companies have been behaving badly, but that doesn’t absolve you of your responsibility to be informed consumers. By taking every necessary step to protect yourself from these kinds of abuses you can breathe a little easier when the next major credit card settlement is revealed.
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