The CFPB announced its first public enforcement action – a consent order against a bank alleging violations of Federal consumer protection laws for deceptive marketing of payment protection and credit monitoring products. According to the consent order, the bank’s third-party service provider engaged in improper sales practices (e.g., misleading consumers by stating that the products would improve their credit score and result in credit limit increases, and referring to the payment protection product as a “back-up fund”).
The consent order calls for civil money penalties of $25 million to be deposited in a civil penalty fund, and up to $140 million in restitution to consumers. The consent order also requires a compliance plan that must (1) address the manner in which marketing and solicitation of the products may occur; (2) develop scripts that clearly and prominently explain and accurately assess a customer’s eligibility for the products; (3) provide certain disclosures (i.e., charges for the product and cancellation policy); (4) mail a disclosure within 3 business days after the customer purchases the product; and (5) submit periodic statements and disclosures to the CFPB for review prior to implementation. The CFPB issued a consumer advisory and fact sheet on the consent order for the bank’s customers and a general consumer advisory on credit card fees.
The CFPB also issued a guidance bulletin setting forth a general warning to supervised institutions and its expectations for the marketing of add-on products. The CFPB expects institutions to “take steps to ensure that they market and sell credit card add-on products in a manner that limits the potential for statutory and regulatory violations and related consumer harm.” Some of the steps highlighted include ensuring that marketing materials are not deceptive or misleading to consumers; that employee incentives or compensation do not provide an incentive for disseminating inaccurate information; and that credit card applicants are not required to purchase add-on products as a condition of obtaining credit.
The OCC also announced a consent order against the same bank for violations of Section 5 of the Federal Trade Commission Act. The consent order provides for $35 million in civil money penalties and up to $150 million in restitution.