The Consumer Financial Protection Bureau, in its first public enforcement case, has ordered banking firm Capital One to pay up to $210 million to settle charges that its credit cards were deceptively marketed by third-party vendors.
Capital One Financial Corp.'s subsidiary bank, Capital One Bank, today reached agreements with the Office of the Comptroller of the Currency (OCC) and the CFPB to resolve previously disclosed issues related to Capital One's oversight of vendor sales practices relating to payment protection and credit monitoring products. As described in both agreements, between August 2010 and January 2012, Capital One's third-party vendors did not always adhere to company sales scripts and sales policies for the products, and the bank did not adequately monitor their activities.
As a result, McLean, Va.-based Capital One will pay between $140 million and $150 million to an estimated two million consumers as a result of the bank's telemarketers deceptively pushing such products as credit monitoring and payment protection. In addition, Capital One will have to pay fines of $25 million to the CFPB and $35 million to the Offices of the Comptroller of the Currency.
The agreement with the OCC also addresses certain billing practices relating to credit monitoring products administered by third-party vendors.
"We are accountable for the actions that vendors take on our behalf," said Ryan Schneider, president of Capital One's credit card business, in a prepared statement. "These marketing calls were inconsistent with the explicit instructions we provided to agents for how these products should be sold. We apologize to those customers who were impacted and we are committed to making it right."
Capital One officials said customers will begin receiving their refunds later this year. In addition, Capital One will pay $25 million ito the CFPB and $35 millionto the OCC in civil money penalties. Executives said they are also strengthening the bank's internal quality control processes and its monitoring of its vendors. Capital One has fully cooperated with both the OCC and the CFPB in addressing these issues.
"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 Richard Cordray, director of the CFPB, in a prepared statement. "We are putting companies on notice that these deceptive practices are against the law and will not be tolerated."
The CFPB was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to help in the oversight of consumer financial products.