The Consumer Financial Protection Bureau (CFPB) investigated the Bank of America for fraudulent credit card practices and has levied a significant fine as part of the settlement. Bank of America will have to pay out roughly $772 million in the settlement that includes payments to customers and fines to federal regulators. According to the CFPB, “from 2000 to 2011, the Charlotte, N.C.-based bank billed 1.5 million customers a total of $459 million for various identity-protection products without the proper authorization. From 2010 to 2012, the bureau says Bank of America also exaggerated or misstated the benefits of two credit-protection programs that allowed some customers to cancel credit-card debt in instances of unemployment or other hardships, allegedly misleading another 1.4 million customers into paying $268 million.” (Time.com)
The Consumer Financial Protection Bureau, established three years ago, first targeted Capital One, in 2012, requiring it to reimburse $150 million to over two million consumers. The CFPB also investigated and discovered deceptive practices at Discover, American Express and most recently, JPMorgan Chase. In the Bank of America settlement, the bank will issue refunds as well as penalties: $20 million to the CFPB and $25 million to the office of the Comptroller of the Currency, “Bank of America both deceived consumers and unfairly billed consumers for services not performed,” said Richard Cordray, the director of the consumer agency. “We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market.”
Time.com reports, “the deal, announced by the Consumer Financial Protection Bureau and the U.S. Office of the Comptroller of the Currency, is the largest refund ever ordered by the three-year-old CFPB, as well as the largest settlement over credit-card add-ons won by the federal government.”
What exactly did Bank of America do? It manipulated credit card customers by offering various identity protections services without getting proper permission. Callers would be redirected to a telemarketer and encouraged to sign up for credit card protection services. According to regulators, bank telemarketers told customers the first month was free, and then the bank charged them. Customers were told there was a death benefit for survivors, but failed to explain that the benefit could only be used to pay off credit card debt. Bank of America led people to believe they were agreeing to get more information about these add-on services yet they were actually enrolling the customers, without express permission.
Bank of America, and its counterparts, manipulated and deceived consumers during a period of high unemployment and economic downturn in the US. At the very time when people struggled to pay their mortgages and put food on the dinner table, these corporate giants made huge profits by playing off or our financial fears. The CEO of Bank of America reportedly earned roughly $12.1 million dollars in 2012, $950,000 salary and over $925,000 in Bank of America stock.
It seems as if the Consumer Financial Protection Bureau did (mostly) what it was designed to do – enforce regulations designed to protect consumers from big banks that sold the equivalent of “snake oil”. How much of an impact this hand-slapping will have on corporate behemoths such as JPMorgan Chase, Bank of America, American Express and Capital One remains to be seen, but at least there was some measure of discipline, no matter how small.
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