Controversial

BOA Joins the $1.6 Billion Dollar Club

The Consumer Financial Protection Bureau (CFPB) on April 9 ordered Bank of America Corp. (BofA) to provide an estimated $727 million in relief to roughly 1.4 million consumers it says were harmed by deceptive marketing related to controversial credit card add-on products. BofA also illegally charged approximately 1.9 million consumer accounts for credit monitoring and credit reporting services that they did not receive, according to the bureau.

The action is not surprising, as BofA indicated in an SEC filing last year that it was in agreement negotiations. Moreover, BofA is not alone in facing these orders, as various other issuers, including JPMorgan Chase ($309 million), American Express ($113 million), Discover ($200 million) and Capital One ($210 million), earlier had reached similar penalty agreements tied to credit card add-on products. Combined, the five issuers paid roughly $1.6 billion.

BofA also will pay a $45 million civil money penalty to the CFPB and to the Office of the Comptroller of the Currency, which also participated in reaching the agreement with issuer.

BofA’s reaction

Betty Riess, BofA spokesperson, tells PYMNTS.com that the bank stopped offering the products in question more than a year ago and that it already had issued refund payments to the majority of affected customers. “We are committed to ensuring that our products and services are marketed and billed responsibly,” she said. Click here for BofA’s official statement.

Richard Cordray, CFPB director, said in the bureau’s agreement announcement that it had warned companies about illegal practices related to credit card add-on products. “Bank of America both deceived consumers and unfairly billed consumers for services not performed. We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market,” he said.

According to the CFPB, BofA from 2010 through 2012 actively marketed two credit card payment protection products, “Credit Protection Plus” and “Credit Protection Deluxe.” Both products allowed customers to request that the bank cancel some amount of credit card debt in the event of certain hardships, such as involuntary unemployment or disability.

Marketers went off-script

The bureau said it found that the telemarketing scripts BofA used for the products contained misstatements, and telemarketers often went off script to make sales pitches that were misleading and that omitted pertinent information.

Among other things, the CFPB said, BofA misled consumers by leading them to believe that the first 30 days of coverage were free of charge when, in fact, by enrolling, consumers were agreeing to purchase the credit protection products. Consumers would begin incurring charges unless they cancelled within an initial 30-day review period, in which case any fees previously paid would be reimbursed.

BofA also misled some consumers about the enrollment process for these products, telling them there were additional steps to enroll in or purchase the products after the telemarketing call when in fact they were being enrolled during the calls and then charged for the products, the CFPB said.

The bank also conducted various other improprieties, including misrepresenting the benefits consumers would receive from credit-protection products, according to the bureau.

The issuer ended the marketing and sales of credit-protection products in August 2012, canceled all existing accounts as of September 2013, and provided six months of no-cost coverage to consumers enrolled as of March 2013. It stopped marketing the identity protection products in approximately December 2011, the CFPB said..

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NEW PYMNTS STUDY: LEVERAGING THE DIGITAL BANKING SHIFT – SEPTEMBER 2020  

The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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