Monday, September 9, 2013

CFPB Capital One Investigation Results In 0M In Fines

CFPB Capital One Investigation Results In 0M In Fines

By Cornelius Nunev


Capital One, the bank that has all those Vikings in its commercials, has settled a regulatory investigation into its charge card marketing by the Consumer Financial Protection Bureau, the first such case for the agency. The CFPB Capital One case has led to the bank having to pay more than $200 million in penalties and reparations.

Consumer Financial Protection Bureau finally finishes first issue

Until now, the Consumer Financial Protection Bureau has not really done anything to enforce or change things except it added a few small laws. It has had a controversial start.

Capital One, a credit card company, was the first victim of the Consumer Financial Protection Bureau who has brought and settled its first enforcement motion against it, according to the Wall Street Journal. The CFPB started a probe to the company because it found that third-party distributors who were selling financial goods on the cards such as credit protection were not clearly named by Capital One. This led to the following suit.

Targeting a group

The bank also offers some additional services to go with having a Capital One credit card, according to ABC, which is sold through third-party vendors. Those services consist of credit monitoring and payment protection, used if an individual is injured or sick and can't make a payment due to missing work. In that case a minimum payment is made on their behalf, a type of insurance against missing a credit card payment.

When customers called to activate their cards, they were routed to call centers. In many cases, the call would last about two minutes and no pitches were made. However, consumers with poor credit who had gotten subprime cards, would often have to listen to at least 8 minutes of sales pitches from phone operators, many of whom pressured them into sales, lied about a cost being involved or exaggerated the scope of the services.

Phone operators promised things like getting the product would improve credit scores, or that customers who were already jobless could get a few payments made for them from payment protection, which needs the policy holder to be employed.

Millions in charges

The investigation decided that Capital One, now part of ING, lost the ability to regulate what these distributors were selling and how they were selling it to customers. As a result, Capital One has agreed to pay $210 million in penalties. Of that, $25 million will go to the Consumer Financial Protection Bureau, a further $35 million will go the Office of the Comptroller of the Currency and $150 million will be paid in restitution to Capital One clients that had been deceived. The bank will even stop selling ancillary charge card goods until it can ensure proper conduct.

Discover financial is facing the Consumer Financial Protection Bureau on similar charges, meaning Capital One is not alone. Capital One also had to pay out a ton of money in England in 1997 due to a similar case. There are 2.5 million customers who will, later this year, receive their money, according to USA Today. Capital One is going to make things right.



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