As the CFPB-Lawblog predicted last month, the CFPB’s $210 million settlement agreement with Capital One was a harbinger of more enforcement actions against credit card companies. Late last week, the CFPB announced another $210 million settlement with Discover to resolve charges that its call-center representatives misled consumers into paying for certain “add-on products”—payment protection, credit score tracking, and identity theft protection.  The CFPB claims that the marketing scripts Discover created for its internal and third-party telemarketers “contained material misrepresentations and omissions” that “were likely to mislead reasonable consumers.” The CFPB further alleges that “Discover’s telemarketers also often downplayed key terms and spoke quickly during the part of the call in which the prices and terms of the add-on products were disclosed.”  Capital One’s settlement with the CFPB also involved the marketing of credit card “add-on products.” 

Under the terms of the joint consent order, Discover will refund approximately $200 million in fees that it received from its cardholders for certain products—regardless of whether the consumer actually wanted the product or not. The company will also pay an additional $14 million in civil penalties to be divided between the CFPB and the FDIC. The agreement also calls for certain changes to the company’s marketing practices and for the company to submit to an independent audit to ensure compliance with the consent order. Discover’s Chairman and Chief Executive David Nelms commented that "[Discover has] worked hard to earn the loyalty of our card members, and we are committed to marketing our products responsibly."

With its second major settlement agreement in three months, there can be no question that the CFPB has set its sights on these add-on products and the companies who provide them. In a written statement, CFPB Director Cordray warned institutions: "We have also published a compliance bulletin to put other institutions more specifically on notice that such tactics are illegal and should be halted.  We continue to expect that more such actions will follow." Cordray also advised that the CFPB is "signaling as clearly as we can that other financial institutions should review their marketing practices to ensure that they are not deceiving or misleading consumers into purchasing financial products or services."

The CFPB has clearly backed up its words by targeting two of the nation’s largest credit card companies, and, in turn, it has put all financial institutions who sell or market “add-on” products on notice that no institution, large or small, is safe from its scrutiny or nearly unabated enforcement authority. It is unclear what specific institutions the CFPB may currently have in its sights, but the Wall Street Journal is reporting that several credit card companies have ceased offering add-on products following the announcement of these settlement agreements.