October 7, 2015

Continued CFPB Focus on Credit Card Add-on Products Yields $3 Million Penalty and Enhanced Board Oversight

2 min

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.