BofA agrees to $783 million settlement in consumer credit card dispute
04/09/2014 12:33 PM
02/03/2015 4:13 PM
Bank of America said Wednesday it will pay $783 million to resolve federal regulators’ claims that the Charlotte bank misled customers in how it marketed and billed for credit card add-on products.
The bank will reimburse $738 million to customers who were affected, and pay a total of $45 million in penalties to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
Bank of America will also have to strengthen its oversight of third-party companies that it uses to market add-on products.
The investigations involved Bank of America’s “credit protection” and “identity theft protection” products, which were marketed alongside its credit cards.
Credit protection promised to reduce a customer’s debts in the event of a job loss or disability, charging a fee of either 0.85 percent of a person’s balance for the basic product or $15.99 per month for a “deluxe” version.
Identify theft protection was designed to monitor a person’s credit and let customers know if any suspicious activity was detected, for a fee of about $12.99 per month.
The Consumer Financial Protection Bureau said it found the bank’s telemarketing pitches for the credit protection product misled customers in several ways, including being unclear when charges would begin and by enrolling people in the program while leading them to believe they were just requesting information. About 1.4 million customers were affected, the bureau said.
The consumer bureau also said it found Bank of America billed customers for identify theft protection without having authorization to check their credit information, meaning people were paying for a service they could not receive. About 1.9 million customers were affected.
Bank of America said it stopped offering both products more than a year ago and has already refunded payments to the majority of customers who were affected.
“We are committed to ensuring that our products and services are marketed and billed responsibly, including those marketed and billed by our vendors,” spokeswoman Betty Reiss said.
The settlement puts an end to the latest long-running legal entanglement facing Bank of America. Regulators had been investigating the bank’s credit card add-ons since at least summer 2012, when Bank of America first disclosed the probes in a securities filing.
The deal also marks the fifth enforcement action related to credit card add-on products brought by the Consumer Financial Protection Bureau, an agency created by the Dodd-Frank financial reform law in 2010. JPMorgan Chase, Discover Financial, Capital One and American Express have all settled with the bureau, for a total of more than $700 million.
Bank of America continues to dig out from numerous investigations and lawsuits by federal regulators and investors. Late last month, the bank entered into a $9.5 billion settlement with the Federal Housing Finance Agency, ending one of the largest remaining probes into mortgage securities Bank of America and its subsidiaries sold before the financial crisis.
Bank of America said in an annual securities filing in February that it believed it could lose up to an additional $6.1 billion because of outstanding litigation, an increase over the year before.
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