An official website of the United States Government

Credit cards

Explainer: Compensating consumers for Bank of America’s illegal tactics for credit card add-on products

By

Today we’re fining Bank of America, N.A. and FIA Card Services, N.A. for unfairly billing consumers for services relating to identity theft protection “add-on” products and for using deceptive marketing and sales practices for credit protection “add-on” products.

We are also ordering Bank of America to refund fees and provide other redress to consumers. Approximately 2.9 million consumers will be receiving or already have received up to $727 million in refunds for fees they paid for these products and services as well as additional redress.

If you’re impacted by the announcement, you don’t have to take any action to receive a credit or check. If you are one of the consumers affected by the order, Bank of America should have already notified you or will notify you directly. If you have questions about whether you are entitled to a refund, you can contact Bank of America.

Who is eligible for compensation?

Nearly 1.4 million consumers have already received or will receive refunds of at least $250 million in fees for the “credit protection” products (Credit Protection Plus and Credit Protection Deluxe). You will receive refunds if you are a Bank of America customer who enrolled in these products at any time over the phone, were charged a fee between October 1, 2010 and March 31, 2013, and either did not activate benefits or who had  a request for benefits denied.

Approximately 1.5 million consumers purchased the “identity theft protection” products (Privacy Guard, PrivacySource, and Privacy Assist) and were improperly billed for services that were not performed. As a result, consumers paid at least $459 million in fees, interest, and over-limit charges for these products without receiving full services. Today’s announcement recognizes the refunds Bank of America has already provided to consumers harmed as a result of the illegal billing practices relating to these identity theft protection products.

Eligible consumers who were enrolled in the “identity theft protection” products received refunds if they enrolled in these products between October 2000 and September 2011 but did not receive full credit monitoring services, received only partial credit monitoring and/or credit report retrieval without notice, and/or didn’t receive credit report retrieval benefits.

What do eligible consumers get?

That depends on the product consumers were enrolled in and some other factors.

Eligible consumers who were enrolled in a “credit protection” product for less than a year, who made a request for benefits that was denied or closed, or who, complained to the CFPB or to Bank of America stating that they did not authorize enrollment in the product, will receive a refund of all fees charged from October 1, 2010 through March 31, 2013. Eligible consumers who were enrolled in a “credit protection” product for a year or more and who do not fall within any of the groups described above will receive a refund of 300 days of fees charged from October 1, 2010 through March 31, 2013.

Some consumers who were enrolled in “credit protection” product will also receive:

  1. A reduction in charged-off balances due to product fees charged from October 1, 2010 through March 31, 2013.
  2. “Credit protection” services for six months at no-cost for consumers enrolled in the product as of March 1, 2013.

Bank of America has already completed reimbursement for the “identity theft protection” eligible consumers, so eligible consumers should have already received refunds. If you have questions about receiving a refund for this product, you can contact Bank of America.

Bank of America is responsible for providing refunds

Watch out for scammers claiming they will get you a refund. When large numbers of consumers get refunds, scammers sometimes pop up. The scammer may charge you a fee or try to steal your personal information. If someone tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to “claim your refund,” it’s a scam. Please call us at (855) 411-CFPB to report the scam.

What sunshine for student financial products can show us

By

Recently, we alerted financial institutions about the potentially risky practice of not readily disclosing arrangements with colleges and universities to market bank accounts, prepaid cards, debit cards, and other financial products to students. Director Cordray called on financial institutions to voluntarily make these agreements available on their websites.

According to a survey of school officials, 69 percent of debit card agreements are already available to the public, since many contracts with public colleges and universities are subject to state open records laws. We identified agreements available in the public domain by checking state open records databases and other websites where agreements were disclosed.

Some financial institutions offer low-cost student financial products as a way of developing long-lasting relationships with students as they start their financial lives. For example, one credit union told us that “over 85 percent of student accounts remain open one year following graduation.” But other financial institutions generate a significant amount of their revenue on these products while students are currently in school.

Here’s how they work

Some of these agreements were difficult to find, but here are a few examples of the different agreements financial institutions have with colleges and universities. We didn’t verify whether these agreements are current, but the examples give us a sense of how some of these agreements work.

1. Direct payments for using school logos

We found several agreements where a financial institution offers a licensing fee in order to use a school’s logo to market its financial products. (In 2008, Congress restricted this practice for student loans, but not for other financial products.) For example, we found an agreement which provides $25 million to a university for use of the school’s logo, among other benefits.

2. Bonuses for recruiting students

Other agreements provide bonus payments based on whether students sign up for a financial institution’s student checking account marketed on campus. For example, one agreement paid a university an upfront payment of $400,000 and an additional bonus of upwards of $200,000 each year if enough new students signed up for the accounts.

3. Discounted prices in exchange for marketing access

Some colleges receive discounted – or even completely free – services in exchange for allowing a provider to market financial products to students. For example, we found many agreements where a financial institution charges a university to transfer loan and scholarship funds to students.

However, some school officials have told us that these charges may be heavily discounted, since these agreements provide the financial institution with unique access to market to students receiving financial aid. This gives the financial institution a foot in the door to generate significant revenue in fees from students, making it worthwhile to provide discounted services to schools.

Committed to transparency?

Many financial institutions offer good products at competitive prices. But as we’ve stated before, voluntarily disclosing these arrangements is a sign of a financial institution’s commitment to transparency when marketing deposit accounts, prepaid cards, financial aid disbursement accounts, and other financial products to students. In doing so, they also want to make sure students know that they have a financial relationship with their school. Responsible financial institutions also want students to know they don’t have to choose their product if they don’t want to.

Actions you can take

Students, schools, financial institutions, or anyone else who wants to share information about the availability of these agreements can email us.

If you are a student, or family member of a student, you can check out our guide to Managing Your College Money and our consumer advisory on accessing student loans and scholarships.

If you have a complaint about a student loan, checking account, or credit card, you can submit a complaint online or by calling (855) 411-2372.

What’s the deal with health care credit cards? Four things you should know

By

Recently, many patients facing medical procedures have seen their health care providers suggest deferred interest rate credit cards as a payment option. Unfortunately, health care providers don’t always explain how these deferred interest credit cards work. We want to make sure that you get the facts you need.

Four things to know about cards with deferred interest rates

This type of credit card isn’t new. You may have seen ads on television, online, or in retail shops for promotional rates like zero-percent interest for the first year. No matter where the credit cards come from—a medical office or a mall store—they have a few features in common. Here’s what you need to know:

1. How to avoid paying interest

Make on-time payments each month and pay off your balance by the end of the promotional period. Minimum payments usually aren’t enough to pay off your entire balance by the end of the promotional period, so think about paying more than the minimum amount each month. Or, save up enough to pay the final amount before the promotional period ends.

2. What happens at the end of the promotional period

If you haven’t paid off the balance for your purchase when the promotional period ends, you’ll be charged interest on your balance for each month, starting from when you first made the purchase. Your credit card company must tell you the date by which you must pay off your balance to avoid paying interest. The date must appear on the front of your bill. If you aren’t sure when your promotional period ends, call your credit card company.

3. Using the card for other purchases

Before using the card again, check with the credit card company to see if you have a “grace period” and how it works. Without a grace period, you’ll pay interest on new purchases from the date you make them.

4. Details matter

Keep track of minimum payments and payment addresses to make sure small errors don’t add up to large interest and penalty charges.

Case in point: GE CareCredit cards

We brought an enforcement action against GE CareCredit to prevent deceptive and unfair credit card enrollment tactics. The enforcement action came after an investigation, where we found that consumers got incorrect information about how their cards worked, and later submitted complaints to us.

As a result of our enforcement action, all consumers enrolling in the CareCredit card in a health care provider’s office will receive a comprehensive “welcome” call from CareCredit within two to three days of enrollment. Certain consumers who sign up for a CareCredit card will speak directly to a representative prior to any enrollment or purchase of services. Additionally, CareCredit will enhance their disclosures to warn consumers when their promotional period is about to end. The company will also do more training of health care office personnel who offer the card. Finally, we ordered CareCredit to reimburse up to $34.1 million to customers who were victims of their deceptive credit card enrollment tactics.

Actions you can take

If you’re having trouble with a deferred interest credit card, you can submit a complaint online or by calling (855) 411-2372.

For more answers about how deferred interest medical credit cards work, check out Ask CFPB.

Four steps you can take if you think your credit or debit card data was hacked

By

Lately, we’ve received a lot of questions about what to do in light of the recent data breach at Target retail stores. This theft of credit and debit card information could impact tens of millions of consumers and we want to let you know what you can do to protect yourself if you spot fraudulent charges.
Protect your credit and debit card information
If your information was part of a breach, the most immediate risk is that the thieves may make unauthorized charges or debits to your accounts. Keep a close eye on your account activity and report suspicious transactions immediately to your bank or credit card provider. The sooner you tell your provider about any unauthorized debits or charges, the better off you’ll be.

1. Check your accounts for unauthorized charges or debits and continue monitoring your accounts

If you have online or mobile access to your accounts, check your transactions as frequently as possible. If you receive paper statements, be sure to open them and review them closely. If your provider offers it, consider signing up for email or text alerts.

Report even small problems right away. Sometimes thieves will process a small debit or charge against your account and return to take more from your bank account or add more charges to your credit card if the first smaller debit or charge goes through. And keep paying attention—fraudulent charges to your card or fraudulent debits to your bank account might occur many months after the theft of your information during a data breach.

2. Report a suspicious charge or debit immediately

Contact your bank or card provider immediately if you suspect an unauthorized debit or charge. If a thief charges items to your account, you should cancel the card and have it replaced before more transactions come through. Even if you’re not sure that PIN information was taken, consider changing your PIN just to be on the safe side.

If your physical credit card has not been lost or stolen, you’re not responsible for unauthorized charges. You can protect yourself from being liable for unauthorized debit card charges by reporting those charges immediately after you find out about them or they show up on your bank statement.

If you spot a fraudulent transaction, call the card provider’s toll-free customer service number immediately. Follow up with a written letter. Your monthly statement or error resolution notice will tell you how and where to report fraudulent charges or billing disputes.

When you communicate in writing, be sure to keep a copy for your records. Write down the dates you make follow-up calls and keep this information together in a file.

If your card or PIN was lost or stolen, different rules may apply. Your timeline for reporting after your card, PIN, or other access device is lost or stolen is tied to when you discover the loss or theft or when unauthorized transactions show up on your bank statement. Therefore, you should make the report as soon as you know that there is a problem

3. Submit a complaint if you have an issue with your bank or card provider’s response

Debit card issuers should investigate the charges (generally within 10 business days) and take action quickly (generally within 3 business days). For your credit card, it can take longer, but you don’t have to pay the charge while it’s under investigation. You also have a right to see the results of their investigations.

If you have an issue with their response, you can submit a complaint online or by calling (855) 411-2372. For TTY/TDD, call (855) 729-2372.

If you have other questions about billing disputes and your debit and credit card protections, you can Ask CFPB.

4. Know when to ignore anyone contacting you to “verify” your account information by phone or email

This could be a common scam, often referred to as “phishing,” to steal your account information. Banks and credit unions never ask for account information through phone or email that they initiate. If you receive this type of contact, you should immediately call your card provider (using a customer service number that you get from a different source than the initial call or email) and report it.

For more information on phishing scams, check out the FTC’s consumer alerts.

For more information, check out the consumer advisory.

Sunshine for student financial products

By

Today, Director Cordray is alerting financial institutions about the potentially risky practice of making secret payments to colleges and universities to market deposit accounts, prepaid cards, debit cards, and other financial products to students. We’re calling on financial institutions to voluntarily make these agreements available on their websites.

We’re also releasing a report on college credit card agreements, which shows a continued decline from 2011 to 2012.

Earlier this year, we set out to better understand how financial products are marketed to college and university students. We heard from many colleges, universities, financial institutions, as well as students and their families. We found that financial product marketing partnerships have shifted away from credit cards towards other products.

Congress created reforms to help consumers better understand the nature of these marketing partnerships. The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) requires credit card issuers to report to us the terms and conditions of any college credit card agreement with an institution of higher education.

This includes the number of credit card accounts, amount of payments made to the company, the number of new accounts, and any agreement between the company and the college or university. You can see these agreements in our public database of college credit card agreements. Check it out and see if your school has an agreement to market credit cards.

Including other products

The CARD Act requirement is limited to credit cards and doesn’t include other financial products marketed through schools. In a public comment submitted to us by the National Association of College and University Business Officers (NACUBO), the association described several best practices, particularly as they relate to debit card arrangements used to access student loan and scholarship proceeds. NACUBO urges institutions to “publicly disclose the terms of any agreements.”

Making these agreements available for students and their families is a sign of a financial institution’s commitment to transparency when marketing deposit accounts, prepaid cards, financial aid disbursement accounts, and other financial products. However, not publicly disclosing these agreements raises potential consumer protection risks.

According to a survey of school officials, 69 percent of debit card arrangements are already available to the public. However, finding these agreements can be troublesome. You may even need to file a formal request under state open records laws to see them. Easier access to these arrangements will increase the public’s confidence that these agreements are structured to help students build a bright financial future.

In the new year, we’ll be contacting financial institutions to find out more about their commitment to transparency. We’ll be asking financial institutions about whether existing agreements are made available to students and families in a clear and conspicuous place on their company’s website. Financial institutions or anyone who wants to share information about the availability of these agreements can email us.

If you are a student, or family member of a student, you can check out our guide to Managing Your College Money and our consumer advisory on accessing student loans and scholarships.

If you have a complaint about a financial product or service, you can submit a complaint online or by calling (855) 411-2372.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visit consumerfinance.gov/students.