Misleading marketing of credit card add-on products that did not deliver what they promised brings regulatory action
About 257,000 cardholders are in line for the refunds, which average $108 a person, under a consent order with the agency. The bank has also agreed to pay $4.5 million to the CFPB’s civil penalty fund. Another $3 million penalty will go to the Office of the Comptroller of the Currency, a bank regulator that participated in the crackdown.
“First National Bank of Omaha violated the trust of its customers by illegally signing them up for credit card add-on products,” CFPB Director Richard Cordray said in a statement announcing the refund.
The company issued an apology, saying it failed to adequately oversee service vendors Affinion and its unit Trilegiant. “While the bank did not intentionally mislead our customers, our oversight of the products and the vendor that administered these products was lacking,” President Daniel K. O’Neill said in a written statement.
From at least 2002 the bank sold debt protection and credit monitoring add-ons to credit card customers. Its “Secure Credit” and “Payment Protection” add-ons were an insurance-like protection designed to cover credit card payments during illness or unemployment. It also sold credit monitoring products called “Privacy Guard” and “Identity Secure” designed to alert users to potential identity theft. The bank dropped the add-on products in 2012.
Some customers were tricked into signing up for debt protection without realizing they were buying a product that would be billed to their credit card account, the CFPB said. The debt protection product was also sold to customers who were not eligible for coverage because they were self-employed or retired.
As for credit monitoring, many customers paid for service they did not receive because authorization to access their credit reports for the service was incomplete, according to the consent order.
The bank has just started the refund process, spokesman Kevin Langin said. Customers are eligible to receive up to a year’s worth of premiums, plus any fees that may have been triggered by the premiums, the consent order states. Customers who filed a claim for refunds and were turned down may receive more than a year’s premiums. The monthly premium for debt protection products was usually equal to 89 cents for every $100 in balances on the card.
Open accounts will receive a credit for the refund, while ex-customers should get a check by mail. For unpaid accounts that were charged off, the refund will be subtracted from the amount due, and any surplus will be sent by mail, the consent order states.
The crackdown marks the 12th action the CFPB has taken against faulty credit card add-ons, the agency said.
First National Bank of Omaha is a unit of First National of Nebraska and has assets of $18.4 billion. It provides co-branded and private label credit cards on behalf of partner banks and merchants through its First Bankcard division.
|COSTLY DECEPTION: REFUNDS FOR CREDIT CARD ADD-ON MARKETING|
|Card issuer or company||Refunds||Announced||Customers given refunds|
|Capital One||$150 million||7/18/2013||2,000,000|
|American Express||$59.5 million||12/4/2013||335,000|
|Bank of America||$727 million||4/9/2014||2,900,000|
|Synchrony Bank||$225 million||6/19/2014||749,000|
|U.S. Bank||$47.9 million||9/25/2014||420,000|
|Affinion Group Holdings Inc.||$6.8 million||7/1/2015||73,000|
|Intersections Inc.||$55,000||7/1/2015||Not available|
|Comenity||$61.5 million||9/9/2015||Not availalble|
|First National Bank of Omaha||$27.75 million||8/25/2015||257,000|
|Totals||$2.77 billion||More than 21 million|