CFPB Issues Consent Order against Bank for Deceptive Marketing of Credit Card Add-On Products and Discriminatory Credit Card Practices
Written by Bernadette Clair, Senior Regulatory Compliance Counsel
Last week, the CFPB ordered Synchrony Bank, formerly known as GE Capital Retail Bank (Ã¢ÂÂBankÃ¢ÂÂ), to pay an estimated $225 million to consumers harmed by deceptive marketing of credit card add-on products and borrowers excluded from credit card debt relief offers because of their national origin. Of that amount, $56 million goes to approximately 638,000 consumers who were subjected to deceptive marketing practices, and the remaining $169 million goes to approximately 108,000 borrowers who were excluded from debt relief offers as part of a joint enforcement action by the CFPB and Department of Justice. The CFPB also assessed a civil money penalty of $3.5 million for the deceptive marketing practices. The CFPBÃ¢ÂÂs press release is available here.
Deceptive Marketing. Similar to a CFPB order that we blogged about a couple of months ago against Bank of America, N.A. and FIA Card Services, N.A., the marketing practices cited in this order focus on credit card add-on products, specifically debt-cancellation products. Â From the press release:
Ã¢ÂÂThe Bureau found that GE CapitalÃ¢ÂÂs telemarketers misrepresented these products to consumers in four main ways:
- MarketedÂ the product as free of charge: Telemarketers led consumers toÂ believe they would not have to pay for these products as long as they paidÂ off the balance on their billing statement. In fact, consumers could onlyÂ avoid the fee in very specific circumstances, such as if the account was notÂ in use or if the customer had paid off the balance prior to GE Capital issuing its monthly billing statement.
- FailedÂ to disclose consumersÃ¢ÂÂ ineligibility: InÂ calls with telemarketers, many consumers mentioned that they were retiredÂ or disabled, which would mean that they were not eligible for key benefitsÂ of the products. Even after hearing this, the telemarketers neglected toÂ tell the consumers that they would not be eligible for key debtÂ cancellation benefits, and the consumers bought the products without thisÂ important information.
- FailedÂ to disclose that consumers were making a purchase:Â In many cases, the telemarketers did not make it clear that consumers wereÂ purchasing a product. Rather, they made it seem like the consumers wereÂ receiving a benefit, updating their accounts, or that the telemarketersÂ were handling other administrative tasks. In these conversations, it wasÂ not obvious to consumers that they were buying something and would beÂ charged a fee.
- MarketedÂ products as a limited time offer: Many customer serviceÂ representatives falsely told consumers that these debt cancellationÂ products were a Ã¢ÂÂlimited time offer.Ã¢ÂÂ In reality, nothing about the availability Â Â Â Â of these products was limited. However, leading consumers to believe theyÂ had a short timeframe to sign up may have created a false sense ofÂ pressure and pushed them to enroll in the products.Ã¢ÂÂ
Under the order, the Bank is required to submit a compliance plan to prevent future violations to its CFPB Regional Director before marketing, soliciting, or selling credit card add-on products by phone.Â The order also requires the Bank to strengthen oversight over any third-party vendors used in connection with marketing or selling add-on products.Â These requirements are similar to those contained in the order issued against Bank of America, N.A. and FIA Card Services, N.A. for deceptive marketing practices.
Discriminatory Credit Card Practices. The CFPB also found that the Bank engaged in discriminatory practices related to credit card debt relief offers.Â According to the order, the Bank offered two promotions to credit card customers with delinquent accounts that allowed the customers to settle their balance by paying off a portion of their debt. However, this offer was not extended to customers who indicated a preference to communicate in Spanish or who had a mailing address in Puerto Rico, even if the customers otherwise met the criteria for the offer.Â
Pursuant to the order, the Bank must provide remediation of at least $169 million to affected consumers in the form of monetary payments, credits, and waivers on accounts, representing the value of the excluded offer, lost interest, and indirect damages.Â Additionally, the Bank is required to work with credit reporting agencies to remove any negative information in consumersÃ¢ÂÂ credit histories as a result of these violations.Â
Although the CFPB assessed a civil money penalty for the deceptive marketing practices, it did not assess a civil money penalty for the discriminatory debt relief offer exclusions Ã¢ÂÂ the CFPB indicated that this was based on a totality of the circumstances, including the BankÃ¢ÂÂs self-policing, prompt reporting to the CFPB, self-initiated consumer remediation, and cooperation with the CFPBÃ¢ÂÂs investigation.
For complete details, the CFPBÃ¢ÂÂs order is available in its entirety here.
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