Approximately 420,000 Consumers Unfairly Charged for Identity Protection “Add-On” Products to Receive Full Refunds
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) is ordering U.S. Bank to provide an estimated $48 million in relief to consumers harmed by illegal billing practices. U.S. Bank consumers were unfairly charged for certain identity protection and credit monitoring services that they did not receive. These services were sold as “add-on products” for credit cards and other bank products such as mortgage loans and checking accounts. U.S. Bank will pay a $5 million civil money penalty to the CFPB and a $4 million penalty to the Office of the Comptroller of the Currency (OCC).
“Today’s action will provide $48 million in relief to U.S. Bank customers who were illegally charged for identity protection services they did not receive,” said CFPB Director Richard Cordray. “We have consistently warned companies about practices related to add-on products and we will do what is necessary to prevent further harm to consumers. “
According to the CFPB order, U.S. Bank’s service provider enrolled bank customers in identity protection add-on products that promised to monitor consumers’ credit and alert them to potentially fraudulent activity. These credit monitoring programs, known as “Privacy Guard” and “Identity Secure” were marketed by U.S. Bank and administered by its third-party vendor.
In order for a company to provide credit monitoring services, it generally must obtain the customer’s written authorization. U.S. Bank customers, however, were charged for these products as soon as they enrolled without the necessary authorization to perform the services. As a result, consumers:
- Were billed for services they did not receive: Consumers were charged fees even though U.S. Bank or its vendors had not obtained the authorization necessary to begin monitoring the consumers’ credit information. In some cases, consumers paid for these services for several years without receiving the promised benefits.
- Unfairly incurred charges for interest and fees: The unfair fees that customers were charged sometimes resulted in customers exceeding their credit card account limits, which led to additional fees for the customers. Some consumers also paid interest charges on the fees for services that were never received.
- Failed to receive product benefits: Consumers may have been under the impression that their credit was being monitored for fraud and identity theft, when, in fact, these services were either not being performed at all, or were only partially being performed.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. The bank will issue refunds to over 420,000 customers in the amount of approximately $48 million. This is the seventh action the Bureau has taken to address illegal practices with respect to credit card and other add-on products.
To ensure that U.S. Bank honors its obligation to repay affected consumers and that consumers are no longer subject to these unfair billing practices, the CFPB’s order requires that U.S. Bank:
- End unfair billing practices: Consumers will no longer be billed for certain credit monitoring services if they are not receiving the promised benefits. In August 2012, U.S. Bank’s service provider stopped the illegal billing practices. U.S. Bank must take steps, subject to the Bureau’s approval, to ensure these unlawful acts do not occur in the future.
- Complete repayment of $48 million to more than 420,000 customers: U.S. Bank must pay a full refund, approximately $48 million, to more than 420,000 bank customers who enrolled in the credit monitoring products and were charged for services that were not received. In addition to the amount paid for the product, U.S. Bank must refund interest and any over-limit fees resulting from the charge for the product.
- Conveniently repay consumers: If the consumers are still U.S. Bank customers, they will receive a credit to their accounts. If they are no longer U.S. Bank customers, they will receive checks in the mail. Consumers are not required to take any action to receive their credit or check.
- Improve oversight of third-party vendors: The CFPB is also requiring that U.S. Bank strengthen its management and oversight of add-on service providers and add-on products.
- Pay a $5 million penalty: U.S. Bank will make a $5 million penalty payment to the CFPB’s Civil Penalty Fund.
Today’s action is being taken in coordination with the OCC which is separately ordering restitution from U.S. Bank for the same illegal practices. These illegal practices were uncovered through supervisory examinations conducted by the CFPB and the OCC. The amount in the OCC’s order includes the same $48 million amount to be paid to the approximately 420,000 consumers harmed by these illegal practices. The OCC is also ordering U.S. Bank to pay $4 million in civil money penalties for the unfair billing practices, in addition to the $5 million penalty ordered by the CFPB.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.