The Consumer Financial Protection Bureau has finally finished its first regulatory investigation. The investigation was conducted into credit card-related products sold by distributors employed by Capital One, in an unlawful manner. The CFPB Capital One case has resulted in the bank spending more than $200 million in fees and restitution.
Capital One issue fixed
Until now, the Consumer Financial Protection Bureau has not really done anything to enforce or change things except it added a few small laws. It has had a controversial start.
The bureau has brought and also finished its first enforcement motion, according to the Wall Street Journal, against charge card business Capital One. The Consumer Financial Protection Bureau Capital One case stemmed from third-party distributors who were selling financial products to go with Capital One's credit cards, like credit protection and payment protection. Capital One was topic of a Consumer Financial Protection Bureau investigation, which found that the card issuer was culpable in not doing enough due diligence on who was selling what.
Targeting a group
The bank also offers some additional services to go with having a Capital One charge card, according to ABC, which is sold through third-party vendors. Those services contain credit monitoring and payment protection, used if a person is injured or sick and can't make a payment due to missing work. In that case a minimum payment is made on their behalf, a type of insurance against missing a charge card payment.
When consumers called to activate their cards, they were routed to call centers. In many cases, the call would last about two minutes and no pitches were made. However, consumers with poor credit who had gotten subprime cards, would often have to listen to at least 8 minutes of sales pitches from phone operators, many of whom pressured them into sales, lied about a cost being involved or exaggerated the scope of the services.
There were false promises from the operators, such as telling those without jobs that they could get a few payments from payment protection even though the customer would not really qualify. They would also promise that a credit rating would improve with the product.
Huge fines assessed
The probe decided that Capital One, now part of ING, lost the ability to regulate what these vendors were selling and how they were selling it to consumers. As a result, Capital One has agreed to pay $210 million in penalties. Of that, $25 million will go to the CFPB, a further $35 million will go the Office of the Comptroller of the Currency and $150 million will be paid in restitution to Capital One clients that had been deceived. The bank will also stop selling ancillary credit card products until it can ensure proper conduct.
Discover financial is facing the Consumer Financial Protection Bureau on comparable charges, meaning Capital One is not alone. Capital One also had to pay out a lot of money in England in 1997 because of a similar case. There are 2.5 million consumers who will, later this year, receive their money, according to USA Today. Capital One is going to make things right.
Capital One issue fixed
Until now, the Consumer Financial Protection Bureau has not really done anything to enforce or change things except it added a few small laws. It has had a controversial start.
The bureau has brought and also finished its first enforcement motion, according to the Wall Street Journal, against charge card business Capital One. The Consumer Financial Protection Bureau Capital One case stemmed from third-party distributors who were selling financial products to go with Capital One's credit cards, like credit protection and payment protection. Capital One was topic of a Consumer Financial Protection Bureau investigation, which found that the card issuer was culpable in not doing enough due diligence on who was selling what.
Targeting a group
The bank also offers some additional services to go with having a Capital One charge card, according to ABC, which is sold through third-party vendors. Those services contain credit monitoring and payment protection, used if a person is injured or sick and can't make a payment due to missing work. In that case a minimum payment is made on their behalf, a type of insurance against missing a charge card payment.
When consumers called to activate their cards, they were routed to call centers. In many cases, the call would last about two minutes and no pitches were made. However, consumers with poor credit who had gotten subprime cards, would often have to listen to at least 8 minutes of sales pitches from phone operators, many of whom pressured them into sales, lied about a cost being involved or exaggerated the scope of the services.
There were false promises from the operators, such as telling those without jobs that they could get a few payments from payment protection even though the customer would not really qualify. They would also promise that a credit rating would improve with the product.
Huge fines assessed
The probe decided that Capital One, now part of ING, lost the ability to regulate what these vendors were selling and how they were selling it to consumers. As a result, Capital One has agreed to pay $210 million in penalties. Of that, $25 million will go to the CFPB, a further $35 million will go the Office of the Comptroller of the Currency and $150 million will be paid in restitution to Capital One clients that had been deceived. The bank will also stop selling ancillary credit card products until it can ensure proper conduct.
Discover financial is facing the Consumer Financial Protection Bureau on comparable charges, meaning Capital One is not alone. Capital One also had to pay out a lot of money in England in 1997 because of a similar case. There are 2.5 million consumers who will, later this year, receive their money, according to USA Today. Capital One is going to make things right.
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