Capital One to Pay $210M Credit Card Settlement

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Capital One has been ordered to pay $210 million to settle allegations it tricked credit card customers into buying unwanted “add-on” products such as payment protection and credit monitoring. Nearly 2 million customers will share a portion of the Capital One credit card settlement, amounting to about $70 apiece. The announcement comes on the heels of a $10.5 million class action lawsuit settlement and $2 million State of Minnesota settlement with Discover Financial Services for the same charges: deceptive marketing of fee-based products.

The Capital One credit card product settlement was the first public enforcement case brought by the federal government’s new Consumer Financial Protection Bureau, established by the Dodd-Frank Act to increase oversight of consumer financial products.  The agency said Capital One customers were wrongly led to believe by call center workers that they needed to buy the add-on services to activate their cards or that debt protection or credit monitoring was free. Other customers were left with the impression that their credit scores would improve with the purchase, while some got billed even though they weren’t eligible.

The bulk of the settlement will go to consumers, with $60 million going toward penalties, $25 million to the CFPB, and $35 million the Office of the Comptroller of the Currency.

“Today’s action puts $140 million back in the pockets of 2 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.”

Cordray said the CFPB will seek restitution for injured consumers in future enforcement actions, including against Discover Financial Services, which reached a class action lawsuit settlement this year to settle charges it deceptively marketed fee-based products, including debt protection and credit monitoring. The CFPB said it has already subpoenaed Discover.

“We know these deceptive marketing tactics for credit card add-on products are not unique to a single institution,” Cordray said. “We expect announcements about other institutions as our ongoing work continues to unfold.”

Capital One apologized for the deceptive credit card marketing tactics and blamed it on third-party vendors.

“Capital One’s third-party vendors did not always adhere to company sales scripts and sales policies for payment protection and credit-monitoring products, and the bank did not adequately monitor their activities,” the bank said in a statement.

Refunds from the Capital One credit card settlement will be automatically credited to customer accounts if they’re eligible. Eligible customers who no longer have a Capital One account will have a check mailed to them. Refunds are expected to be handed out later this year. Customers are urged to watch out for spammers claiming they will get them a refund. More information can be found in this post from the CFPB.