WASHINGTON (7/19/12)--Credit unions should be aware of compliance guidance posted yesterday by the Consumer Financial Protection Bureau (CFPB) that addresses marketing practices associated with certain "add-on" features related to credit cards.
The guidance was, at least in part, prompted by the CFPB's announcement of its first public enforcement order, which requires Capital One Bank (U.S.A.), N.A., to refund approximately $140 million to two million customers and pay an additional $25 million penalty because of alleged deceptive marketing tactics used by Capital One's vendors.
CFPB said it determined that Capital One vendors pressured or mislead consumers into paying for "add-on products," such as payment protection and credit monitoring, when they activated their credit cards.
CFPB said the compliance bulletin puts other financial institutions on notice that the bureau "will not tolerate deceptive marketing practices, and institutions will be held responsible for the actions of their third-party vendors."
The bulletin addresses Regulation B (Equal Credit Opportunity Act) and Regulation Z (Truth in Lending Act) provisions, as they relate to credit card practices. While only credit unions with more than $10 billion in assets fall directly under CFPB supervision, on matters involving interpretive guidance on consumer protection laws and regulations under the CFPB's purview the National Credit Union Administration will defer to the CFPB.
The guidance sets forth both steps to be taken to ensure vendors market and sell credit card add-on products in a manner that limits the potential for statutory or regulatory violations and related consumer harm, as well as a list of features that should be included in compliance management by financial institutions that offer credit card add-on products. (See resource link to read guidance.)
The CFPB enforcement action Tuesday was taken in coordination with the Office of the Comptroller of the Currency. Between the agencies actions, Capital One was assessed $60 million in total civil money penalty with $150 million in total restitution to cardholders.
Use the resource link to read the examiners' findings regarding Capital One opt-in marketing practices.