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From Banking and Finance Law Daily, April 9, 2014

Bank of America agrees to $772 million in settlements over credit card add-on practices

By Richard A. Roth, J.D.

Bank of America, N.A., has agreed to pay $727 million in consumer relief to settle charges that its marketing of credit card payment protection plans was deceptive and that it enrolled consumers in identity theft protection programs without their consent, the Consumer Financial Protection Bureau has announced. BofA also has agreed to pay a $20 million civil penalty, which will go to the bureau’s Civil Penalty Fund. While it agreed to the CFPB consent order, BofA did not admit any wrongdoing.

The Office of the Comptroller of the Currency separately has announced a settlement of its own charges. BofA will pay the OCC an additional $25 million civil money penalty to settle the agency’s charges that the bank violated the Federal Trade Commission Act. The bank has agreed to make restitution to consumers who were harmed, but the restitution is satisfied by what is required under the CFPB’s order. Again, the bank has not admitted any wrongdoing under the settlement order, which relates solely to the bank’s billing for its identity theft protection programs.

Deceptive marketing. The bureau’s charges of deceptive marketing came from two BofA programs: “Credit Protection Plus” and “Credit Protection Deluxe.” Both programs allowed consumers who paid a monthly fee to request that some part of their credit card debt be cancelled if they suffered a hardship such as a layoff or disability or if they had a major life change such as retirement. However, the CFPB concluded that the bank’s telemarketing script included misstatements and also that telemarketers diverged from the script, making sales pitches that were misleading or incomplete.

Specifically, the bureau said that consumers were misinformed about:

  • whether the first 30 days of coverage were free;

  • whether additional steps were needed before enrollment in a program was complete and charges were incurred; and

  • what benefits the consumers would receive.

As many as 1.4 million consumers were affected, the bureau said.

Unfair billing. Three credit card identity theft protection products were at the heart of the CFPB’s unfair billing charges: “Privacy Guard,” “Privacy Source,” and “Privacy Assist.” According to the bureau, the programs promised to monitor consumers’ credit and alert them to any fraudulent activity. However, to do so, the bank and its service providers needed access to the consumers’ credit information, and access was available only with the consumers’ consent.

The CFPB claimed the bank enrolled consumers in the programs and billed them for the services without first obtaining their consent. As a result:

  • consumers were charged for services they were not yet receiving;

  • consumers were charged interest and fees when the program charges pushed their accounts over the consumers’ credit limits; and

  • consumers were charged for services that were not performed.

About 1.5 million consumers—and 1.9 million accounts—were affected, the bureau said, and the consumers suffered approximately $459 million in harm.

Remedies. The bureau said that BofA already has taken steps to remedy the problems. The bank stopped marketing the identity theft protection in December 2011 and the credit protection in August 2012. Many credit protection customers also were given six months of free coverage. The bank already has repaid consumers who were harmed by the unfair billing, the CFPB said.

Despite those efforts, the settlement imposes substantial penalties on BofA. In addition to making the consumer relief and civil penalty payments, the bank is banned from selling any credit protection or credit monitoring add-on product until it has submitted a compliance plan for CFPB approval.

Companies: Bank of America, N.A.; FIA Card Services, N.A.

MainStory: TopStory CFPB CreditDebitGiftCards EnforcementActions TruthInLending UDAAP

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