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In First Enforcement, Consumer Watchdog Fines Capital One

People use an ATM at a Capital One Bank branch in Washington in April 2012.
Nicholas Kamm
AFP/Getty Images
People use an ATM at a Capital One Bank branch in Washington in April 2012.

Capital One Bank has agreed to refund two million of its customers $140 million over allegations that it used deceptive marketing tactics to pressure or mislead customers into buying add-on products, the Consumer Financial Protection Bureau announced today. The bank and credit-card lending company will also pay a $25 million penalty.

This is the consumer watchdog agency's first public enforcement action.

"We are putting companies on notice that these deceptive practices are against the law and will not be tolerated," the agency's director Richard Cordray said in a statement.

If you've ever activated a credit card, you're surely familiar with the "add ons." The CFPB said that for customers doing business with Capital One during the past two years that included "payment protection" plans and credit monitoring services.

In prepared remarks, Cordray said consumers were mislead in at least four ways. Some, for example, were "wrongly encouraged to believe they had to purchase these products to activate their cards." Others were led to believe these products were free. Others were led to believe that buying the products would improve their credit scores. Finally, some customers were sold the products even though they were ineligible for some of the benefits advertised.

"We expect announcements about other institutions as our ongoing work continues to unfold," Cordray said in prepared remarks. "Regardless, the best time for all institutions to be reviewing and ensuring their practices in this area is right now. Consumers deserve to be treated fairly by their credit card issuers, and that is our objective."

Capital One blamed its third party vendors for the misleading marketing.

"We are accountable for the actions that vendors take on our behalf," Ryan Schneider, president of Capital One's card business,said in a 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."

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Eyder Peralta is NPR's East Africa correspondent based in Nairobi, Kenya.

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