Prepared Remarks of CFPB Director Richard Cordray on the Bank of America Enforcement Action Press Call
Thank you for joining us on this call today. Central to our mission here at the Consumer Bureau is the duty to identify and root out unfair, deceptive, and abusive practices in financial markets. So when we see credit card companies charging customers for services they did not receive or using deceptive marketing to pitch products to consumers, it is important that we take action. Today we are ordering Bank of America to refund $727 million to the millions of consumers who were subjected to illegal credit card practices.
Today’s action against Bank of America is our fifth action with fellow regulators against illegal practices in the credit card add-on market. We have seen several cases of deceptive marketing and illegal billing in this market. Here, Bank of America was doing both.
Consumers were most often misled during inbound and outbound telemarketing calls. When customers called Bank of America, whether to activate a card or to inquire about a balance transfer, they would often reach a telemarketer who would try to sell them payment protection products. Payment protection products would theoretically allow customers to cancel some amount of credit card debt in the event of certain hardships like involuntary unemployment or disability, or for certain life events like marriage or graduation.
Problems frequently arose when telemarketers discussed the benefits of these products – because Bank of America’s scripts contained false statements about these benefits. For example, one script we reviewed stated that with “Credit Protection Plus,” Bank of America would cancel up to 18 months of the consumer’s minimum balance if the consumer was admitted to the hospital for as little as one night. In reality, a single night’s hospital stay would only entitle consumers who successfully navigated Bank of America’s claims process to one month of benefits – not the 18 months claimed in the scripts.
We also found out that Bank of America was misleading consumers about whether they were actually purchasing the credit protection products. Bank of America and its telemarketers misled some consumers into believing they were not purchasing a product, when actually they were already being charged for such a purchase. We found two main problems with the company’s telemarketing here.
One was that the company represented that additional steps were required to enroll in or purchase the credit protection products after the telemarketing call, when no such further steps were required. The other was representing that customers were just consenting to receive additional information about the credit protection products when, in fact, Bank of America was already enrolling customers in those products.
In the two years these payment protection products were on the market, they generated hundreds of millions of dollars in revenue for Bank of America. Meanwhile, about 1.4 million consumers were subjected to these deceptive marketing tactics.
The second major problem we found was with Bank of America’s identity protection add-on products. These products promised to monitor customer credit and alert consumers to potentially fraudulent activity. We found that Bank of America was charging customers for identity protection services they did not receive. Most customers paid about $12.99 a month for these services. In order for any company to obtain consumers’ credit information, the consumers generally must authorize access to that information.
But Bank of America billed consumers for these products before they had the permission to access the information they needed to perform the monitoring service. As a result, about 1.9 million consumer accounts were improperly billed product fees while not receiving the full product services, affecting roughly 1.5 million consumers. Instead of consumers receiving the protection they were promised, they were being illegally charged by one of the nation’s largest banks for little or no benefit to themselves.
Today’s enforcement action puts an end to these unfair billing practices as well as the deceptive marketing tactics described earlier. Including refunds that Bank of America has already completed, customers will receive $727 million in restitution and additional redress, including $268 million to those who were subjected to deceptive marketing tactics, and $459 million to those who were illegally charged.
Consumers who are still with Bank of America will receive credits to their account if they have not already. Those who are no longer with Bank of America have received or will be mailed checks for the appropriate amounts.
In addition to the $727 million in restitution, the Bureau is also ordering Bank of America to pay $20 million in civil penalties. I would also like to thank the Office of the Comptroller of the Currency for their hard work and close partnership with us on these issues. Together, we will continue to be vigilant in pursuit of anyone who deceives or mistreats consumers. Through the five enforcement actions the Bureau has taken to date on credit card add-on products, we have now put nearly $1.5 billion back into consumers’ pockets. We intend to continue cleaning up this market as necessary to ensure that consumers are treated fairly. Thank you.
The Consumer Financial Protection Bureau (CFPB) 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 www.consumerfinance.gov.