Consumer protection bureau tells credit monitoring vendors to reimburse customers who paid for services they didn’t get
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The U.S. Consumer Financial Protection Bureau announced enforcement actions against two vendors of add-on products Wednesday, marking the first direct crackdowns on vendors that sold the products through affiliations with card-issuing banks.
“Consumers have every right to get what they pay for,” CFPB Director Richard Cordray said in the announcement. “But we are still finding that thousands of consumers paid for add-on benefits they were promised but never received.”
Since 2012 the CFPB has announced seven major crackdowns at card-issuing banks for flawed credit card add-on products, resulting in $12 million in refunds. Payment protection plans as well as credit monitoring were involved in those refunds.
Under the consent orders announced Wednesday, Affinion Group Holdings Inc. will pay about $6.8 million to 73,000 customers plus a $1.9 million civil penalty to the consumer protection bureau.
The vendors started charging consumers for benefits before providing them, for example because customers’ written authorization for credit monitoring had not been submitted to the credit bureau. Some people paid for years for protection they weren’t getting, the CFPB said.
The CFPB’s complaint describes Affinion’s customer retention program as rife with false and misleading information. When people called to stop being billed, employees inflated claims about the protection provided and omitted mentioning that federal law and card networks’ policies already protect consumers from having to pay for fraudulent charges. Affinion paid bonuses to employees who got “saves” — their internal term for persuading a customer not to cancel. Those who failed to meet a quota for averting cancellations were disciplined.
Affinion must also stop billing for services it is not able to provide, and stop trying to persuade customers to keep the service when they call to cancel, court papers said.
Also named in court papers were affiliated companies Affinion Group Inc., Affinion Group LLC, Affinion Benefits Group LLC, Trilegiant Corp., Watchguard Registration Services Inc. and Global Protection Services LLC. The second vendor, Intersections Inc., will pay about $55,000 in refunds to a relatively small number of consumers who haven’t already received them, plus a civil penalty of $1.2 million. “The vast majority of the approximately 300,000 affected consumers have already received refunds,” the consumer protection bureau said of Intersections customers. Refund-eligible consumers enrolled in services between January 2009 and February 2013, generally paying between $8 and $13 a month.
Getting your refund
People due a refund enrolled in credit monitoring with Affinion between July 2010 and August 2012. They were usually billed between $6.95 and $15.99 a month for the services, which sometimes included retrieval of their credit report as well as monitoring, the CFPB said.
In past crackdowns, refunds came to cardholders through credits on their statements, if they still had an open account. Refunds announced Wednesday, however, will be made separately from the cards associated with the add-ons, according to court papers, which did not name the credit cards involved. The vendors must come up with refund plans and submit them to the consumer bureau. The proposed orders still face approval of federal courts in Virginia and Connecticut before taking effect.
Eligible consumers don’t need to file claims or take other action to get their refund, the CFPB said in answers to emailed questions.
“Corporate crime,” Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group, said on Twitter about the crackdown. “CFPB nails club (companies) Affinion, Intersections that fail to provide even junky credit card add-ons.”
Affinion has been the target of lawsuits for other “gray charges” on credit card bills, such as for discount clubs that consumers weren’t aware they were enrolled in.
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