Consumer Protection Watchdog Announces Action Against Capital One

Press Release: Jul 18 2012

CFPB probe into Capital One credit card marketing results in $140 million consumer refund

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) announced its first public enforcement action with an order requiring Capital One Bank (U.S.A.), N.A. to refund approximately $140 million to two million customers and pay an additional $25 million penalty. This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for “add-on products” such as payment protection and credit monitoring when they activated their credit cards.

“Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,” said CFPB Director Richard Cordray. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”

Through the supervision process, CFPB’s examiners discovered Capital One’s call-center vendors engaged in deceptive tactics to sell the company’s credit card add-on products. These products included “payment protection,” which allows consumers to request that the bank cancel up to 12 months of minimum payments – roughly one percent of their credit card balance – if they encounter certain life events like unemployment and temporary disability. It also provides debt forgiveness in the event of death or permanent disability. Another product was “credit monitoring,” with services such as identity-theft protection, access to “credit education specialists,” and, in some cases, daily monitoring and notification.

Consumers with low credit scores or low credit limits were offered these products by Capital One’s call-center vendors when they called to have their new credit cards activated. As part of the high-pressure tactics Capital One representatives used to sell these add-on products, consumers were:

  • Misled about the benefits of the products: Consumers were sometimes led to believe that the product would improve their credit scores and help them increase the credit limit on their Capital One credit card.
  • Deceived about the nature of the products: Consumers were not always told that buying the products was optional. In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.
  • Misled about eligibility:  Although most of the payment protection benefits kicked in when consumers became disabled or lost a job, some call center representatives marketed and sold the product to ineligible unemployed and disabled consumers. Despite paying the full fees, they could not get all the benefits of payment protection; some later filed claims that were denied because their “loss” (e.g. loss of job or onset of disability) occurred prior to enrollment.
  • Misinformed about cost of the products:  Consumers were sometimes led to believe that they would be enrolling in a free product rather than making a purchase.
  • Enrolled without their consent:   Some call center vendors processed the add-on product purchases without the consumer’s consent. Consumers were then automatically billed for the product and often had trouble cancelling the product when they called to do so.

Enforcement Action
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to issue Consent Orders and take action against institutions engaging in unfair, deceptive, or abusive practices. To ensure that all affected consumers are repaid and that consumers are no longer subject to these misleading and high-pressure tactics, Capital One has agreed to:

  1. End deceptive marketing: Capital One has ceased all marketing of these products, and will not resume doing so until Capital One submits a compliance plan, acceptable to the Bureau, which helps ensure these unlawful acts do not occur in the future.
  2. Complete repayment, plus interest, to two million consumers:  Capital One will pay approximately $140 million to all of the estimated two million consumers who either initially enrolled in a product on or after August 1, 2010, or who tried to cancel a product on or after August 1, 2010, but were persuaded to keep the product after speaking with a call center representative. In addition to the amount paid for the product, cardmembers will receive a refund of the associated finance charges, any over-the-limit fees resulting from the charge for the product, and interest.
  3. Pay claims denied based on ineligibility at enrollment:  For any of these eligible consumers whose payment protection claims were previously denied because their loss occurred prior to enrollment (because of unemployment, disability, etc.), Capital One will pay their claims as if they had been eligible, if that amount is greater than the refund for that consumer.
  4. Convenient repayment for consumers:  If the consumers are still Capital One customers, they will receive a credit to their accounts. If they are no longer a Capital One credit card holder, they will receive a check in the mail. Consumers are not required to take any action to receive their credit or check.
  5. Independent audit:  Compliance with the terms of this agreement will be assured through the work of an independent auditor, who will determine if Capital One has complied with the CFPB’s Consent Order.
  6. $25 million penalty:  Capital One will make a $25 million penalty payment to the CFPB’s Civil Penalty Fund.

Today’s action is being taken in coordination with the Office of the Comptroller of the Currency (OCC), which is separately ordering restitution of approximately $150 million from Capital One. This amount includes the same $140 million refund to be paid to the approximately two million customers harmed by the deceptive marketing practices identified by the CFPB’s examiners. The OCC’s order also includes separate restitution for additional consumers harmed by unfair billing practices taking place between May 2002 and June 2011 in violation of Section 5 of the Federal Trade Commission (FTC) Act. For the combined activity, the OCC is assessing a $35 million civil money penalty against Capital One.

In conjunction with today’s enforcement action, the Bureau is releasing two Consumer Advisories. One advisory is intended to make Capital One customers aware of today’s action and the other serves as a general warning to consumers who may encounter such deceptive practices.

Complaints received by the CFPB indicate – and the Bureau’s supervisory experience confirms – that other consumers have been misled by the marketing and sales practices associated with credit card add-on products. To further protect consumers, the Bureau is issuing a compliance bulletin that puts other institutions on notice that the CFPB will not tolerate deceptive marketing practices, and institutions will be held responsible for the actions of their third-party vendors. Companies engaging in deceptive practices will be expected to refund fees paid by consumers and, particularly where practices are widespread, pay an appropriate penalty.

The full text of the CFPB’s Consent Order

A factsheet on the Consent Order.

Find out how Capital One will handle refunds.

Beware of Smishing!

Smishing is when a scam artist pretends to be a lottery business on your cell phone.   They say you are a winner and ask for your bank information. The calls are computerized and are just calling numbers at random, which is how they get your cellphone number. Watch this video by the Better Business Bureau for more information.

 

 

If you have been “SMISHED” or otherwise scammed, the Lawyer Referral Service of the New Hampshire Bar Association can refer you to an attorney who may be able to assist you with sorting out the financial mess created by the scam artists. Call 603-229-0002 or request an online referral.

Campus Debit Cards May Carry Hidden Fees

According to a report by the United States Public Interest Research Group (USPIRG)  many banks are taking advantage of students who need campus debit cards to access their financial aid.  They may appear to be an easy low-cost solution to handling finances while in school, but many of these cards carry excessive hidden fees.

“Campus debit cards are wolves in sheep’s clothing,” Rich Williams, one of the co-authors of the USPIRG report, said in a recent press release,  “Students think they can access their dollars freely, but instead their aid is being eaten up in fees.”

Although campus debit cards are not required to access a student’s financial aid, many banks market their product directly on colleges’ financial aid websites, often creating the perception of being the only option.

Debit cards have received less federal oversight. And, according to a study, by the United States Public Interest Research Group Education Fund, an advocacy organization, nearly 900 colleges and universities have card relationships with banks or other financial institutions, some of which manage student aid disbursements by turning student IDs into debit cards. Some schools save money by outsourcing administrative costs. Others receive payments from the banks.

Read the entire article by Jeff Ousley at Veteransunited.com

 

 

Few Borrowers in Foreclosure Apply for Free Review

Only a tiny percentage of the 4.3 million homeowners facing foreclosure have applied for a free foreclosure  review to check for errors, despite the fact that they could be eligible for up to $100,000 if errors are found.

The review process was put into effect as a result of the “robo-signing” scandal, where several banks admitted to mishandling some foreclosure documents, resulting in some homeowners wrongfully losing their homes.

In the wake of the scandal, federal bank regulators required 14 mortgage companies to establish the Independent Foreclosure Review process.

The review costs homeowners nothing, but at last count, only 165,000 people — fewer than 4 percent of those eligible — have applied.

The original April 30 deadline has since been extended to July 31.

Read the entire story by Yuki Noguchi at NPR.

Find out if you are eligible for an independent foreclosure review.

If you are facing foreclosure and would like assistance with reviewing your options, contact a home ownership and loss mitigation counseling agency for free counseling on the options available to you to prevent or mitigate the foreclosure.

If it is determined that you will need the assistance of an attorney, the Lawyer Referral Service of the NH Bar Association can help with a referral to a competent attorney who specifically handles foreclosure matters.  Call 603-229-0002 or request an online referral.

 

Office of Mortgage Settlement Oversight Created

For immediate release:  April 5, 2012
Contact:  Laura Brewer – 919-508-7821

Mortgage Settlement Monitor Begins Work
Joseph Smith appointed to oversee 49-state, five-bank pact; opens office in Raleigh
RALEIGH, N.C. – Joseph A. Smith, Jr. today officially assumed his position as the monitor of the mortgage servicing settlement among 49 states, the federal government and five major banks. In this role, Smith will work to ensure that the banks follow the requirements outlined in the settlement agreement. Today also marks the formal creation of the Office of Mortgage Settlement Oversight (OMSO), the body Smith has set up to facilitate his work.

Participants in the settlement unofficially named Smith as their choice in early February when news of the agreement became public, but both the settlement and Smith’s appointment became official when the United States District Court for the District of Columbia made final consent judgments affecting each of the banks.

In response to the agreement, Smith said, “Today, in keeping with the charge I’ve received from the Court and the parties to the settlement, I have opened the Office of Mortgage Settlement Oversight and begun to carry out my duties as Monitor.

“The mortgage settlement is a bipartisan achievement that holds promise for millions of people. Our nation depends on its home financing system not only to function properly, but also to inspire confidence in the people who use it. By itself, this settlement will not remedy every problem that system faces. But trust in our mortgage system can move forward if we use this opportunity to show fairness, transparency and accountability. This is a responsibility I take seriously.”

Smith will receive periodic reports from the settlement participants and oversee bank compliance with the agreement. The Monitor will then report his findings, determinations and actions to the Court and a Monitoring Committee of state and federal government representatives. The Monitor is empowered to work with noncompliant institutions to establish corrective plans, or, if necessary, to recommend penalties or to seek injunctive relief to enforce the settlement.

“Since the settlement was announced last month, people have understandably paid a great deal of attention to the specifics of the consent judgment – who will pay, who will receive, and how much,” Smith said. “Those are important matters to determine. But this settlement also serves those who do not participate in the transfer of money: the neighbors of distressed borrowers whose property values stand at risk because of foreclosed properties in their midst, the communities in which they live, the people saving now toward the goal of home ownership, and everyone whose living depends on a robust housing and home finance industry.”

More information about the mortgage settlement.

More information about the Office of Mortgage Settlement.

If you believe your home was illegally foreclosed on and you have not been contacted by a settlement administrator, the Lawyer Referral Service of the NH Bar Association may be able to help with a referral to an attorney who can review your situation.  A consultation with a competent attorney can make all the difference!  Call 603-229-0002 or request an online referral.

How Will the Mortgage Settlement Affect Distressed Homeowners?

49 state attorney’s general have reached a landmark agreement with 5 of the nation’s top loan servicers (Bank of America, Wells Fargo, Citi, JPMorgan Chase, and Ally/GMAC).  The settlement will provide up to 25 billion dollars in relief to distressed borrowers and direct payments to states and the federal government.

The agreement settles state and federal investigations finding that the loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.  Both of these practices violate the law.

The settlement provides benefits to borrowers in the signing states whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service.

Homeowners whose primary residence was part of a foreclosure action between January 1, 2009 and December 31, 2010, and whose home loan was serviced by a participating servicer, may be eligible for an Independent Foreclosure Review.  

To find out more information regarding how this settlement may affect borrowers or how to find out if you qualify for assistance, check out the new National Mortgage Settlement website, and/or read the press release from the NH Attorney General’s office.

If your home is in foreclosure, an attorney may be able to assist you.  Call the Lawyer Referral Service today at 603-229-0002 for a referral to a competent lawyer who specifically handles foreclosure matters in New Hampshire, or request an online referral.   A consultation with an attorney could make all the difference!

 

American Central Lending Services – Consumer ALERT

Released December 14, 2011 by Michael A. Delaney, New Hampshire Attorney General

NEWS RELEASE

    
Attorney General Michael A. Delaney has issued a consumer alert to warn consumers about a fraudulent Internet lending operation using the name American Central Lending Services and falsely representing that they are located in Portsmouth, NH.  Investigators have determined that this company does not do business in New Hampshire, has no ties to New Hampshire and is engaging in false and deceptive practices in attempts to steal money from consumers.

The Attorney General’s Consumer Protection Bureau warns consumers to exercise extreme caution when applying for a loan through the Internet and to not provide sensitive and confidential information on any on-line application, such as address, date of birth, social security information or banking/credit card information without having particular guarantees that the company is legitimate and the website is secure.  Consumers are also cautioned that any request to wire money, especially out of the country, is a red flag indicating a potential consumer scam.  Consumers should only wire money when they have personal knowledge and familiarity with the recipient.  Often scam artists operate outside of the United States and are skilled at concealing their true identities and location.

Consumers may obtain other information about consumer protection issues, or report consumer complaints, on the Consumer Protection Bureau’s website at <http://www.doj.nh.gov/consumer>.  

If you  have been victimized by an internet scam, the Lawyer Referral Service can refer you to competent attorneys who are trained to handle this type of legal matter.  Call LRS today at (603) 229-0002 or request a referral online at https://www.newhampshirelawyerreferral.com/contact-us.

LawLine: Free Legal Advice – 800-868-1212

Do you have a BRIEF LEGAL QUESTION? LawLine, the NH Bar Association’s free legal hotline is held on the second Wednesday of each month, from 6 – 8 pm.

Volunteer New Hampshire attorneys will take calls from the public and will give brief legal information and advice. This is a FREE public service. Call 1-800-868-1212.

Do you have more than a brief legal question and suspect you may need an attorney to represent you?  The NH Lawyer Referral Service can refer you to a competent local  attorney who handles your type of legal matter.  Call (603) 229-0002 today or fill out the Lawyer Referral Service request form at:  https://www.newhampshirelawyerreferral.com/contact-us.