Prepared Remarks by Richard Cordray
Director of the Consumer Financial Protection Bureau
CFPB Enforcement Action
July 18, 2012
Thank you. As you know, the Consumer Financial Protection Bureau was created in the wake of the worst financial crisis since the Great Depression. Part of our mission is to identify and root out unfair, deceptive, and abusive practices in financial markets that harm consumers. We are authorized to do this in various ways, including supervisory oversight and enforcement actions.
Through our supervision process, our examiners uncovered problems at Capital One in the marketing of credit card “add-on products.” We found that Capital One’s call center representatives were using deceptive tactics to sell “Payment Protection” and “Credit Monitoring” products to consumers with low credit scores and low credit limits. When these consumers called to activate a new credit card, they were misled and deceived into buying products they did not understand, and many were signed up and charged for products without clear notice about what was happening.
The marketing of these products was misleading and deceptive in at least four ways. First, many consumers were wrongly encouraged to believe they had to purchase these products to activate their cards. Second, some consumers were either deceived into thinking these products were free or were simply enrolled without their full consent and automatically billed. Third, some consumers were wrongly led to believe that these products would improve their credit score or help them build good credit. Fourth, some consumers were sold the product even though they were disabled or unemployed and thereby ineligible for some of the benefits being touted. Furthermore, once customers became aware of these problems or no longer wanted to pay for the product, they were given the runaround or further misled as a means of keeping them enrolled. Capital One’s compliance mechanisms failed to prevent, identify, and correct the practices.
These practices are against the law, and thus have resulted in an enforcement action to protect consumers. Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, and in some cases, couldn’t even use.
I am pleased to say that the Office of the Comptroller of the Currency fully joined in this effort and our teams worked alongside one another to reach this outcome. The Bureau’s Chief of Enforcement, Kent Markus, will provide more specific details of today’s enforcement action in just a moment. The OCC is making an announcement as well.
We have spent the last year building our supervision program across the country. Our examiners in the field are doing their job and coordinating with their fellow regulators to put the power of the supervisory tool to work for American consumers.
We have also spent a great deal of time at the Consumer Bureau forging a strong relationship between our supervision and enforcement teams. Our examiners worked closely with our enforcement team to yield the results we have announced today.
The Bureau is also issuing consumer advisories and a compliance bulletin today. The advisories spell out key facts about credit card add-on products, including red flags and how consumers can find out more about these products from a reputable source. We want to alert not only Capital One consumers about their refund, but also to flag these practices for customers of other institutions who may be considering or using these products.
We know these deceptive marketing tactics for credit card add-on products are not unique to a single institution. The compliance bulletin puts all financial institutions on notice about these prohibited practices and reinforces that they must make sure their service providers are complying with the law. We expect announcements about other institutions as our ongoing work continues to unfold. Regardless, the best time for all institutions to be reviewing and ensuring their practices in this area is right now. Consumers deserve to be treated fairly by their credit card issuers, and that is our objective.