On September 28, the CFPB settled with Fifth Third Bank
over allegations of improper credit card add-on products that the
CFPB alleged violated federal consumer protections laws. Credit
card add-on products have been a consistent focus for the CFPB,
which notes that its action against Fifth Third "is the 11th
credit card add-on enforcement action the Bureau has taken against
companies for illegal practices in the marketing or administration
of add-on products and services."
The CFPB alleged that the credit card add-on product promised to
allow enrolled cardholders to request the cancellation of credit
card payments if they experienced certain hardships, such as job
loss, disability, and hospitalization. Customers who enrolled were
charged a monthly fee of either 0.81% or 0.89% of their card
balance.
Violations of the consumer protections laws occurred through the
bank's telemarketing advertisements of the product, as well as
information it published about the product. For example, the CFPB
alleges that telemarketers did not tell some cardholders that by
agreeing to receive information about the product, they were being
enrolled and would be charged a fee. Additionally, the CFPB states
that Fifth Third sent cardholders product "fulfillment
kits" that contained incorrect descriptions of the
product's cost, benefits, exclusions, terms, and
conditions.
In addition to standard injunctive relief, the CFPB's order
requires that Fifth Third provide $3 million in relief to consumers
and pay a $500,000 civil money penalty. The order also requires
greater oversight of service providers and places limitations on
future credit card add-on products. Further, the order mandates
increased participation by the bank's board, particularly
through ensuring compliance with the order by creating a Special
Regulatory Oversight Committee.
This latest addition to the string of CFPB credit card add-on cases
highlights the Bureau's continued focus on this product, as
well as extended look-back periods (the order against Fifth Third
went back to conduct in 2007).
Industry participants are encouraged to review any current add-on
products for compliance and examine previous offers to catch latent
liability.
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