On July 18, 2012, the same day the CFPB announced its joint enforcement action against Capital One, the Bureau also issued a compliance bulletin for credit card issuers on marketing add-on products. (Bulletin 2012-06). The bulletin outlines the Bureau's expectations that "institutions under its supervision and their service providers offer such products in compliance with Federal consumer financial law" and its intent to "take all necessary steps to ensure that consumers are protected from deceptive sales and marketing practices."
The Bureau expressed its concern over deceptive marketing and sales practices, including the failure to adequately disclose key terms and conditions, the enrollment of consumers without their consent, and the imposition of charges for services not provided. It also warned institutions about related violations of Federal consumer financial laws, including TILA, ECOA, and the Dodd-Frank Act prohibition against deceptive practices.
The CFPB included a list of steps that card issuers and their service providers should take to ensure compliance with applicable law and avoid harming consumers. These steps include that:
- Marketing materials, including direct mail promotions, telemarketing scripts, internet and print ads, radio recordings, and television commercials, reflect the actual terms and conditions of the product and are not deceptive or misleading to consumers;
- Employee incentive or compensation programs tied to the sale and marketing of add-on products require adherence to institution-specific program guidelines and do not create incentives for employees to provide inaccurate information about the products;
Scripts and manuals used by the institution’s telemarketing and customer service centers:
- Direct the telemarketers and customer service representatives to accurately state the terms and conditions of the various products, including material limitations on eligibility for benefits;
- Prohibit enrolling consumers in programs without clear affirmative consent to purchase the add-on product, obtained after the consumer has been informed of the terms and conditions;
- Provide clear guidance as to the wording and appropriate use of rebuttal language and any limits on the number of times that the telemarketer or customer service representative may attempt to rebut the consumer’s request for additional information or to decline the product; and
- Where applicable, make clear to consumers that the purchase of add-on products is not required as a condition of obtaining credit, unless there is such a requirement.
- To the maximum extent practicable, telemarketers and customer service representatives do not deviate from approved scripts;
- Applicants are not required on a prohibited basis to purchase add-on products as a condition of obtaining credit; and
- Cancellation requests are handled in a manner that is consistent with the product’s actual terms and conditions and that does not mislead the consumer.
In addition, institutions that offer credit card add-on products should employ compliance management programs that include:
- Written policies and procedures governing credit card add-on products designed to ensure compliance with prohibitions against deceptive acts and practices, TILA, ECOA, and any other applicable Federal and state consumer financial protection laws and regulations;
- A system of periodic Quality Assurance reviews, the scope of which includes, but is not limited to, reviews of training materials and scripts, as well as real-time monitoring and recording of telemarketing and customer service calls in their entirety, consistent with applicable laws;
- Independent audits of the credit card add-on programs, which address the items listed above and consider whether these programs present elevated risk of harming consumers;
- Oversight of any affiliates or third-party service providers that perform marketing or other functions related to credit card add-on product so that these third-parties are held to the same standard, including audits, quality assurance reviews, training, and compensation structure;
- An appropriate channel for receiving, investigating, and properly resolving consumer complaints related to add-on products; and
- A comprehensive training program for employees involved in the marketing, sale, and operation of credit card add-on products.
The CFPB has indicated that it will continue to closely monitor its supervised institutions and their service providers for deceptive activities in connection with the marketing and sales of add-on products, and will take whatever supervisory and enforcement action is warranted. Although the bulletin solely addresses card products, the CFPB has advised all institutions to consider the guidance when offering similar products for other credit and deposit services.