Data Dive

Data Dive: The Good, The Bad And The Terribly Confused Edition

“If you can’t convince them, confuse them.”

The above was famously said by President Harry S. Truman on the nature of politics and winning over an audience. Convincing is the best way to go, according to Truman — but in a pinch, a confused audience might take their lack of comprehension as a sign of the candidate’s superior intelligence.

But in the real world of commerce, confusion is not a great tool.

At worst, it will get you into some serious trouble with a regulator.

Just ask the team at Wells Fargo…

Wells’ Billion Dollar Fine

A one billion dollar fine has arrived on Wells Fargo’s doorstep as part of a “coordinated action” between the Consumer Finance Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC). The CFPB assessed a $1 billion penalty against the bank, but the Bureau credited the $500 million penalty collected by the OCC against the fine, the bureau said in a statement.

To bring on such a robust fine, Wells was found guilty of violating the Consumer Financial Protection Act (CFPA) through the operation of an insurance program tied to its auto lending business.

Specifically, Wells admitted to attaching GAP insurance (insurance on the difference between a car’s sale value and loan balance paid out if a car on a payment should be destroyed) to 570,000 auto-lending consumers. Those customers did not ask for it, and in many cases did not want it. For some borrowers it became a burden. According to an internal review by the bank, 20,000 customers may have defaulted on their auto loans and lost their vehicles partly because of the cost of the auto insurance that was rolled into the loan for which they did not ask.

Additionally, Wells Fargo was found to be liable for how it charged certain borrowers for mortgage interest rate-lock extensions.

The punishment surprised some CFPB watchers, who had thought Mulvaney might give Wells Fargo a pass — or at least greatly pare back the fine. In his brief tenure as interim head, he has halted all new actions, postponed increased regulation on the payday lending market and dropped lawsuits against companies. He has also said the agency hasn’t engaged in any new enforcement actions since he took over.

But, in announcing this action, Mulvaney seemed confident that this fine more properly lives up to the CFPB’s responsibility to consumers and institutions.

“I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations,” Consumer Financial Protection Bureau Acting Director Mick Mulvaney said in a statement. “As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here.”

Beyond the $1 billion payout, the bank has been ordered to take steps to remediate harmed consumers — and “undertake activities related to risk management and compliance management.”

Google Pay’s 100 Million Downloads

It seems the latest redesign of Google Pay is paying off, as the firm this week announced they have passed the 100 million mark when it comes to new installs.

The news comes a few short weeks after Google’s announcement of its intention to launch a new mobile app for viewing and managing payments across platforms, cards and other payment methods, in addition to plans for making the Google Pay capability accessible to all — no matter what device they’re using, no matter where they’re shopping and no matter whether they’ve established an account on a Google property before.

The goal?

To be the easy, totally ubiquitous payments touch point for any customer.

You know, the easy stuff.

In a recent interview with Karen Webster, Google’s VP of Project Management for Payments Pali Bhat said the secret sauce in the move is tapping an ability to convert the hundreds of millions of consumer accounts with registered card credentials on any one of Google’s touch points into Google Pay accounts — all in the background, without creating friction for the customer.

“All users must do,” said Bhat, “is say ‘yes’.”

“We have a billion users on Chrome,” Bhat said. “We want every one of those users to be able to pay. Users are already checking out [with merchants] on Chrome, so it will be easy to save their credentials there.”

As of now, it seems they have 100 million of those users down. Only 900,000 left to go.

Calming Credit Card Confusion

Companies work hard to build customer love and loyalty with rewards — cash back or points that customers can accrue to make more purchases with in the future.

Just one small problem, though — almost half of all Americans are having a hard time following the schemes.

According to data from NextAdvisor, 54 percent of Americans find frequent flyer miles confusing, while 47 percent are perplexed by hotel loyalty programs, and 45 percent are flummoxed by their card rewards.

In addition, 47 percent don’t even know how many points they have for their hotel loyalty program, 35 percent don’t know how many frequent flyer miles they have.

About 24 percent don’t have a clue as to how to redeem their rewards in general.

“While consumers are definitely out of the loop when it comes to their rewards credit cards, they aren’t the only ones to blame,” NextAdvisor wrote in the blog post. “Since credit card issuers are in control of their cards’ rewards and redemption opportunities, it’s clear that some issuers are also failing to educate their cardholders.”

Interestingly, whether or not consumers actually understand them, they do like loyalty programs.  According to data out of Citigroup, 67 percent said having a rewards program is the biggest reason to choose a specific credit card — beating out interest rate and sign-up bonus as considerations.

To avoid being too confused to use them, NextAdvisor also recommends calling customer service to get a better feel for how easy — or not—- it is to redeem and use rewards points.

“After you learn more about your credit card’s rewards program, you may realize that your current credit card isn’t a good fit for you,” added NextAdvisor. “If that’s the case, it’s time to start shopping for a new credit card.”

So what did we learn this week?

Being confusing doesn’t pay — clarity is the best policy.

Until next week!


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.