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Capital One Bank NA will pay out $210 million in fines and penalties, following the Consumer Financial Protection Bureau’s determination that the bank was engaging in “deceptive marketing tactics.”
According to the CFPB, Capital One’s sales network was pressuring and misleading customers into buying so-called add-on products like payment protection and credit monitoring at the time of card activation. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated,” said Director Richard Cordray in a statement.
Capital One has not admitted any wrongdoing, and today’s announced payouts are part of a settlement agreement. Its official statement reads: “Capital One's third party vendors did not always adhere to company sales scripts and sales policies for Payment Protection and Credit Monitoring products, and the bank did not adequately monitor their activities.”
“We are accountable for the actions that vendors take on our behalf," said Ryan Schneider, President of Capital One's Card business, in the statement.
The $210 million payout Capital One is now responsible for will end up with three different parties: $140 million will be paid to consumers in the form of refunds; $25 million goes to pay a fine levied by the CFPB; and $35 million is for a fine charged by the Office of the Comptroller of the Currency.
An estimated two million consumers will receive some form of refund from Capital One, the CFPB says, either as a credit on current account statement or via check. Capital One says consumers will begin receiving refunds later this year.
If the CFPB decides to further pursue other banks that sell such products, more refunds and penalties may be on the way. “This practice is hardly limited to Capital One,” said Philadelphia lawyer Richard Golomb in an interview with the New York Times. Indeed, Bloomberg reports that the CFPB and FDIC have already subpoenaed other issuers regarding related subjects.
Capital One has likely been on the CFPB’s radar since the agency began collecting financial services complaints from consumers. In its first annual report, roughly 16 percent of the complaints filed by consumers were tied to Capital One accounts, representing roughly 2,700 filings between July 21, 2011, and May 15, 2012, the most of any issuer.
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