New consumer watchdog gets $150 million back for abused credit card customers
The Consumer Financial Protection Bureau is celebrating its second birthday with a bang.
The watchdog agency resolved its first case against the banking industry today.
Capital One Financial agreed to a $210 million settlement, with about $150 million of that going to reimburse the credit card customers it abused and $60 million being paid to the government in fines.
What did Capital One do?
Stuff we've complained about time and time again but that regulators always ignored -- until now.
According to the CFPB, Capital One was pushing add-on products to its credit card customers, such as credit monitoring plans, identity theft protection and insurance that makes the minimum payments on credit cards if you lose your job.
The problem is that these programs were marketed in such a way that customers thought they couldn't activate their credit cards without them or that the add-ons were free.
The CFPB also found that Capital One sold these products to people who didn't need them and couldn't afford them, and then didn't actually give customers what they were paying for.
Sometimes they enrolled and charged customers for these services without their consent. They also lied to some customers, saying the programs would help improve credit scores.
Capital One blames all of that on independent companies hired to market the services that veered off the sales scripts they were given.
But in a statement, the bank acknowledged it was ultimately responsible for monitoring what those companies were telling its customers.
So the next time some banking industry executive, or one of their bought-and-paid-for friends in Congress, rants on about how the CFPB just isn’t necessary, here’s $210 million reasons why they’re wrong.
And despite all the abuse the industry has heaped on the bureau, a new survey also released today shows the public remains solidly behind the CFPB and its mission.
Three-quarters of likely voters said the still favor the Dodd-Frank financial reform act that created the agency, and two-thirds of those voters specifically said they think the CFPB is needed.
The survey was taken by Lake Research Partners and paid for by several consumer-friendly groups – AARP, Center for Responsible Lending, Americans for Financial Reform and National Council of La Raza.
While I’m sure the CFPB will continue to be a political target this election year, I suspect public support for it will grow as consumers see the difference it can make on their behalf.
"We are putting companies on notice that these deceptive practices are against the law and will not be tolerated," CFPB Director Richard Cordray told a news briefing.
While he declined to name names, Cordray said he expects similar complaints to be pursued against other banks because “we know these deceptive tactics are not unique to a single institution.”
All I can add is that it’s about time.