During the month of August, we have focused on the CFPB's efforts at rule writing in the Debt Collection and Small Dollar Loan spaces. We have published blog summaries of what and how the CFPB is proposing to regulate in these fields.
While this rule writing activity has been ongoing, the CFPB has not lost its focus on enforcement actions, punishing those who harm consumers with loans and loan products that are unfair, deceptive or abusive. A case in point is the CFPB's settlement agreement last week with the First National Bank of Omaha totaling $32.25 million--$27.75 million in customer restitution and $4.5 million in fines.
The CFPB began investigating the credit card and debt cancellation “add-on” products offered by the Bank to roughly 257,000 customers. The investigation revealed that the Bank engaged in processes that illegally signed up customers for these products. Director Cordray in his press release said, “This result today, shows strong and consistent action against credit card companies that dupe consumers into buying a product they do not want.”
The actions of the Bank that the Bureau found to be unfair, deceptive or abusive included:
- Disguising the fact that it was selling consumers a product through the credit card activation process.
- Distracting consumers into making a purchase by leading them to believe that they were merely agreeing to receive a “benefit” of the card, rather than a separate product that would be charged to them.
- Failed to disclose consumers' eligibility requirements that led some consumers to purchase a product for which they were actually ineligible.
- Sold products whose eligibility standards actually prevented consumers from obtaining the promised benefits.
- Marketed products as “easily cancellable” but made cancellation difficult.
- Billed customers for credit monitoring services that were never provided.
The investigation and settlement of these practices were a cooperative venture of the CFPB and the Office of the Comptroller of the Currency—the prudential regulator of the national bank. So, in addition to the Bank paying the $32.25 million, it was also socked for a $3 million civil money penalty payable to the OCC. This was the eighth action taken by the CFPB with another agency and the twelfth such action addressing credit card add-on products. Of particular interest is that the time period covered by the settlement reached back to 1997 for the unfair billing practices and to 2010 for the deceptive enrollment practices. So much for the concept of a statute of limitations…