Capital One to Pay $210 Million in Restitution and Penalties in CFPB’s First Enforcement Action

The federal Consumer Financial Protection Bureau (CFPB) has announced that Capital One Bank will pay $210 million to resolve charges of deceptive marketing brought in the CFPB’s first enforcement action. The $150 million restitution component of the total payment will be in the form of refunds to customers who purchased “add-on” credit card services that were deceptively marketed. The remaining $60 million is to be paid in the form of penalties, $25 million to the CFPB and $35 million to the Office of the Comptroller of the Currency, which jointly brought the charges along with the CFPB. The CFPB press release announcing the resolution of the Capital One enforcement action is available here.

The action against Capital One alleged that the credit card giant contracted with vendors who deceptively marketed add-on services, including credit monitoring and payment protection plans, often to Capital One’s most vulnerable customers. The CFPB investigation determined that some consumers were made to believe that buying the optional services was essential to their credit cards being activated, while others were deceived into believing that the services were free, or would cause their credit scores to improve. Indeed, it appeared that the vendors targeted individuals with low credit scores. Particularly deceptive was the pitch for the “payment protection” service, which was purchased by unemployed individuals in the belief that their credit card minimum payments would be covered. However, such already unemployed individuals were ineligible for the payment protection service, which applied only to job loss or disability incurred after buying the service. Additionally, the CFPB found that consumers who attempted to cancel the add-on services were confronted by onerous procedures, and often gave up in frustration.

“Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,” said CFPB Director Richard Cordray. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”  In addition to sending an advisory to Capital One customers as part of the resolution, the CFPB also drafted a generally applicable advisory, which is available here.  

Founded in 2011, the CFPB’s self-described mission is “to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”