Nearly 2.9 million customers who were deceptively sold add-on credit card products and unfairly billed by Bank of America Corporation (BAC) will now get refunds. In aggregate, BofA will be reimbursing approximately $727 million to these customers according to the order by the Consumer Financial Protection Bureau (CFPB).
Of the total refund amount, BofA will be paying $268 million to the customers who became victims of deceptive marketing practices while the remaining $459 million will be refunded to consumers who were wrongly charged for services not provided.
Further, BofA will be paying $20 million in fines to the CFPB while another $25 million will be paid to the Office of the Comptroller of the Currency (OCC). Both the regulatory bodies penalized the bank for unfair billing practices.
Allegations
The CFPB alleged that BofA used misleading marketing strategy to sell add-on credit card services and unfairly billed customers for services they were not receiving.
For nearly three years since 2010, BofA marketed two credit card payment protection products – ‘Credit Protection Plus’ and ‘Credit Protection Deluxe’. These products offered credit card debt cancellation in case of involuntary job loss or any other hardship. BofA deceived more than 1.4 million customers regarding the cost of these products.
The CFPB found that problem began with the telemarketers who were supposed to sell these products. In order to increase the sales figure, the telemarketers often mis-stated or omitted important information to consumers.
Additionally, BofA wrongly charged nearly 1.9 million customer accounts for credit monitoring and credit reporting services, which were actually not received by them. The company was engaged in providing this service from Oct 2000 till Sep 2011.
BofA registered consumers in identity protection credit card add-on products like ‘Privacy Guard’, ‘Privacy Source’ and ‘Privacy Assist’ without obtaining customers’ approval for accessing their credit information. This violated federal law.
Implication
Following an industry-wide probe in to the credit card lending practices, BofA stopped offering identity-theft protection products in Dec 2011. Further, credit card payment protection products were terminated in Aug 2012.
Also, BofA has already issued refunds to approximately 1.5 million customers who were affected. However, while agreeing to the above-mentioned order, the company did not admit or deny any charges.
BofA is the fifth company against which the CFPB has taken action. Since 2012, this regulatory body penalized Capital One Financial Corporation (COF), American Express Company (AXP), Discover Financial Services and JPMorgan Chase & Co. (JPM) on similar charges.
Currently, BofA carries a Zacks Rank #4 (Sell).
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