Research and Statistics

Banks making refunds for add-on products


Fifth Third bank agreed to refund some $3 million to about 24,500 customers for debt protection coverage that regulators say was marketed falsely

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Banks making refunds for add-on products

Cincinnati-based Fifth Third Bank will refund about $3 million to 24,500 credit card customers for faulty marketing of its debt protection add-on product, the U.S. Consumer Financial Protection Bureau announced Monday.

The crackdown marks federal regulators’ 12th enforcement action involving credit card add-ons since September 2012 (see chart: “Costly deception: refunds for credit card add-on marketing“).

Add-on products come in two main variations. Debt protection plans, also called payment protection, cover payments for cardholders who are laid off, disabled or face other emergencies. The second major add-on product is credit monitoring, which alerts cardholders to changes on their credit report that may indicate identity theft or other fraud.

Fifth Third’s actions
Starting in December 2011, Fifth Third marketed a debt protection plan for 89 cents per $100 of monthly balances as of the statement closing date. The protection was supposed to cover card payments for cardholders who lost their job, became disabled, or who encountered certain other setbacks.

The bank stopped enrolling customers in the protection plan in February 2013.

Before the product was halted, marketers for Fifth Third enrolled cardholders who merely consented to have information sent to them, or opted for a risk-free trial, the CFPB said. Marketers also falsely told cardholders that they could avoid the monthly fee by paying the balance in full by the due date, among other misrepresentations.

The debt protection plan marketed in 2011 replaced an earlier version that started in January 2007 and cost 81 cents per $100 of monthly balances.

A dozen enforcement actions
The actions constituted deceptive acts and practices under the U.S. Consumer Financial Protection Act, the CFPB said in its order. Fifth Third consented to the order without admitting or denying the consumer protection bureau’s findings.

Consumers who were enrolled in Fifth Third’s debt protection at some time between Jan. 1, 2007, and Nov. 11, 2013, are eligible for refunds. Consumers enrolled for more than 12 months are also eligible for refunds of over-limit and late fees triggered by debt protection fees, plus the related interest costs. Current customers will receive credit for their refund on their statement, while ex-customers will receive checks by mail. For delinquent accounts that were sold off, Fifth Third must buy back the debt and reduce the amount owed by the amount of the refund due. In addition to the refunds, the bank will pay a $500,000 penalty to the CFPB.

Auto lending penalized
Also Monday, regulators announced that Fifth Third consented to refund $18 million to African-American and Hispanic borrowers for auto loan pricing practices under the Equal Credit Opportunity Act. The bank let auto dealers mark up loans as much as 2.5 percent regardless of the borrower’s credit standing. As a result, thousands of minority borrowers were charged more for their loans, with the overage being $200 on average, according to a CFPB announcement. The consumer protection bureau conducted a joint investigation with the U.S. Justice Department of the bank’s indirect auto lending.

Fifth Third in a statement said the order does not involve loans the bank makes directly to customers, but rather loans written by auto dealers through Fifth Third. “In reaching this settlement, Fifth Third stands firm in its conviction that we have treated and will continue to treat our customers in a fair, open and honest manner,” the statement said.

Card issuer or company RefundsAnnouncedCustomers given refunds
Discover$200 million9/24/20123,500,000
Capital One$150 million7/18/20132,000,000
Chase$309 million9/19/20132,100,000
American Express$59.5 million12/4/2013335,000
Bank of America$727 million4/9/20142,900,000
Synchrony Bank$225 million6/19/2014749,000
U.S. Bank$47.9 million9/25/2014420,000
Affinion Group Holdings Inc.$6.8 million7/1/201573,000
Intersections Inc.$55,0007/1/2015Not available
Citibank$698.8 million7/21/20158,800,000
Comenity$61.5 million9/9/2015Not availalble
Fifth Third Bank$3 million9/28/201524,500
Totals$2.49 billionMore than 20.8 million

See related: FDIC: Store card issuer Comenity must refund $61.5 million

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