CFPB Continues Add-On Products Crackdown

Credit Cards CFPB Enforcement Ancillary Products

On December 23, the CFPB announced a coordinated enforcement action taken by federal regulators against a major credit card company and certain subsidiaries alleged to have violated multiple consumer protection laws with respect to credit card add-on products. The action, which is the fourth action taken by the CFPB relating to credit card add-on products, and the fifth add-on product action overall, extends the CFPB’s intense supervisory and enforcement focus on ancillary products and oversight of third-party service providers.

In coordination with the FDIC and the OCC, the CFPB ordered the companies to refund an estimated $59.5 million to more than 335,000 customers for certain credit card practices, including allegedly unfair billing tactics and deceptive marketing. The company must also pay an additional $9.6 million in civil penalties, submit to an independent review of other credit card add-on products, and continue to implement enhanced third-party oversight.

The consent orders allege that the company misled consumers about the benefits, fees, length of coverage, and terms and conditions of certain payment protection products, and that the company billed consumers for services they did not receive, unfairly charged consumers for interest and fees, and failed to comply with federal requirements to inform consumers about their right to a free credit report.

The coordinated action follows another taken by federal regulators last year, in which the same companies were ordered to refund approximately $85 million in connection with alleged UDAAP violations related to the offering of a rewards card and certain debt collection practices.