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U.S. Bank refunds $48 million for add-ons

Summary

The Consumer Financial Protection Bureau extended its crackdown on bank add-on products to U.S. Bank, which charged for credit protection products that consumers didn’t always receive

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About 420,000 customers of U.S. Bank will share refunds totaling $48 million for credit protection they did not receive, the Consumer Financial Protection Bureau announced Thursday.

 

The bank’s service provider billed customers for add-ons called “Privacy Guard” and “Identity Secure” before customers gave the written authorization necessary to monitor their credit, the agency said in a consent order. The products were offered with credit cards, mortgage loans and checking accounts.

“We have consistently warned companies about practices related to add-on products and we will do what is necessary to prevent further harm to consumers,” CFPB Director Richard Cordray said in a statement.

Without admitting wrongdoing, the Minneapolis-based bank also agreed to pay fines of $5 million to the CFPB and $4 million to the Office of the Comptroller of the Currency, in addition to making refunds.

It was the CFPB’s seventh crackdown against bank add-on products since 2012, and the smallest in terms of refunds. Most recently in June, the agency ordered GE Capital, now called Synchrony, to refund $225 million, of which $56 million involved the company’s debt cancellation add-on product. All told, the seven card-issuing financial institutions have been ordered to repay $1.7 billion to about 12 million customers for add-on marketing federal regulators considered deceptive (see chart, “Costly deception: Refunds for credit card add-on marketing“).

U.S. Bank customers who paid for credit monitoring they did not receive will get refunds for the over-limit fees and interest that were sometimes triggered by charges for the add-on product, as well as for the charges themselves.

Service provider Affinion administered the add-ons from 2003 to about August 2012, according to the CFPB order. During this time, U.S. Bank customers who had not provided written authorization for credit monitoring were billed for the service anyway.

“Consumers may have been under the impression that their credit was being monitored for fraud and identity theft, when in fact these services were either not being performed at all, or were only partially being performed,” the CFPB statement said.

Affected customers who still have an account at U.S. Bank are supposed to receive a credit, the agency said. Ex-customers should receive a check in the mail. People who are due refunds do not need to make a claim or take other action, according to the CFPB. The average refund amount is about $114.

U.S. Bank representatives did not immediately respond to questions about the status of the refund program, or whether credit monitoring is still offered. The order requires U.S. Bank to form a compliance committee to oversee the refunds, and bars the bank from obtaining a tax deduction or insurance payment to offset the fines paid to regulators.

COSTLY DECEPTION: REFUNDS FOR CREDIT CARD ADD-ON MARKETING
Card issuerRefundsAnnouncedCustomers 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
Totals$1.718 billion12,004,000

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