by Kyle Colona on July 19, 2012
The new consumer watchdog finally did something of note by delivering its first enforcement action against the financial industry.
The Consumer Financial Protection Bureau announced that Capital One Bank has been fined for “pressuring and misleading more than two million credit card customers.” The bank will cough up $210 million to resolve a pair of regulatory cases in what the New York Times Dealbook called the “the latest legal setback for the financial industry.”
The nascent consumer watchdog accused the bank of “deceptive marketing tactics.” The credit card company also received a “regulatory rebuke” for misleading card customers into buying unnecessary products like payment protection and credit monitoring.
As part of the deal Capital One will reimburse about $140 million to customers. Meanwhile in a separate but related action the Office of the Comptroller of the Currency, which regulates national banks, also sanctioned Capital One for bogus billing practices that spanned nearly a decade.
“We are putting companies on notice that these deceptive practices are against the law and will not be tolerated,” said Richard Cordray, the director of the Consumer Financial Protection Bureau.
Dealbook notes that the case against Capital One could be the “first of many” regulatory actions against consumer lenders that are aggressively pitching payment-protection insurance programs.
The insurance apparently has become attractive in the depths of the recession; however, credit card companies typically charge up to 80 cents for every $100 of debt that is insured. Banks have long pushed these products, but are ramping up their pitch count, so to speak to recover billions in lost income resulting from new federal curbs on debit and credit-card fees.
The regulatory scrutiny comes on the heels of several Wall Street blowups and federal investigations. The Capital One action was the first attempt by the Consumer Financial Protection Bureau to exercise its enforcement muscle. But it comes two years after the agency’s doors were opened.
So outside of making announcements of new rules and duties the CFPB was assuming from the Federal Trade Commission, this announcement seems like shameless self promotion by a government agency that has yet to prove its worth.
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Kyle Colona is a New York-based freelance writer and a Feature Writer for CompliancEX and the Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications. You can find him on linkedin.