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Capital One to Pay $210 Million Including Refunds and Penalties

The Consumer Financial Protection Bureau struck Capital One hard this week. The consumer protection agency has found that the credit card company improperly marketed add-on products to its customers. Because of this behavior, Capital One has agreed to pay refunds to 2.5 million customers totaling about $150 million, in addition to a $25 million penalty to the CFPB and a $35 million penalty to a regulator, the Office of the Comptroller of the Currency.

Capital One customers with low credit scores and bad credit were targets of sales pitches for products like “Privacy Guard” and “Payment Protection.” Capital One has stated these products are sold by a third-party vendor, but the issuer failed to monitor the company’s sales activities. Many customers found themselves enrolled in these programs without knowing they signed up for them, and in many cases, customers were not told that these services were optional. Even with the misleading sales tactics, the products are generally ineffective at worst, overpriced at best.

When a new credit card user calls to activate their card, once that process is done, the customer is transferred to a sales team. The process of activating a card is, for the most part, just a way to get customers to listen to a sales pitch. Activating a card, if necessary in the first place, could be done with an automated system or online; there’s no technological need to talk to a company representative. Issuers keep this activation process because it allows them to pitch unnecessary add-ons, just as Capital One has been accused of doing.

The Consumer Financial Protection Bureau explained exactly how customers were misled, to alleviate any thought that customers were given enough information on these calls to make an informed decision about their enrollment:

As part of the high-pressure tactics Capital One representatives used to sell these add-on products, consumers were:

  • Misled about the benefits of the products: Consumers were sometimes led to believe that the product would improve their credit scores and help them increase the credit limit on their Capital One credit card.
  • Deceived about the nature of the products: Consumers were not always told that buying the products was optional. In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.
  • Misled about eligibility: Although most of the payment protection benefits kicked in when consumers became disabled or lost a job, some call center representatives marketed and sold the product to ineligible unemployed and disabled consumers. Despite paying the full fees, they could not get all the benefits of payment protection; some later filed claims that were denied because their “loss” (e.g. loss of job or onset of disability) occurred prior to enrollment.
  • Misinformed about cost of the products: Consumers were sometimes led to believe that they would be enrolling in a free product rather than making a purchase.
  • Enrolled without their consent: Some call center vendors processed the add-on product purchases without the consumer’s consent. Consumers were then automatically billed for the product and often had trouble cancelling the product when they called to do so.

The above affects 2 million of the 2.5 million customers due refunds. The remaining approximately 500,000 customers to receive refunds come from a separate order from the OCC, in which the regular targets unfair billing practices from May 2002 through June 2011. In this respect, Capital One was in violation of Section 5 of the Federal Trade Commission (FTC) Act (unfair or deceptive acts or practices).

Customers within the group of 2.5 million due refunds do not need to take any action if their Capital One accounts are still open. The refund will be credited to the accounts in which the cost of these products were charged. For the customers who have closed their accounts, the refunds will be sent via check to the account’s last known address.

Did you ever sign up for these products offered by Capital One? Did you have trouble canceling? Were you enrolled without your knowledge? Has any other issuer ever tried to sell you products when activating your card? If you have any stories to share about deceptive practices like these, please share by leaving your story below.

American Banker,, Consumer Financial Protection Bureau

Updated April 13, 2016 and originally published July 20, 2012.

About the author

Luke Landes is the founder of shizennougyou. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 12 comments… read them below or add one }

avatar 1 Anonymous

I really think people should be sent to jail for this sort of activity. That’s the only way it’ll ever stop. What’s $210 mil to Cap One, a couple hours of revenue? And it doesn’t hurt directly the company’s managers, only the shareholders.

If I walk through an unlocked door to your house and take $100 cash that happens to be on the kitchen table, I go to jail. If Capital One takes $100 from your bank account through deception, no one goes to jail, and the punishment is in fact meaningless. Why the difference?

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avatar 2 Anonymous

What crime have we ever “stopped” by sending people to jail? Murder, arson, burglary? Which criminal action doesn’t occur anymore because of consequence? The best defense against these types of crime is consumer intelligence and a healthy dose of skepticism when this crap is offered. Although the coming consent decree will stop them (and others) from using this particular approach, another approach will follow – trust me! Don’t get me wrong – punishment is a necessary part of society but it’s just punishment, it is not prevention.

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avatar 3 Luke Landes

This is true. Punishment hasn’t been shown to deter society’s problems. People still kill others despite knowledge about the punishment. Corporate scammers will continue to pull off their scams regardless of how many others are “punished.” The ability for greed to permeate any hole — any corner of consumer life not being watched — will continue regardless of regulations and punishment. One hole plugged will just force the flow of water through another.

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avatar 4 Luke Landes

The answer to that question lies in who is more likely to commit those crimes or misdemeanors. The burglar who breaks into your home is an easy target, who may have an appearance different than the “average” American, and probably doesn’t have the means to control the opinions of other people, while high-level corporate scammers who pull off these tactics are well-connected, are well-funded, and for the most part look similar to the majority of the country’s population. Law enforcement is designed to keep the “riff-raff” at bay, not to punish old, white men, until under immense pressure.

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avatar 5 Anonymous

Not to mount any defense for Capital One, I deplore what was done, but how do you identify that old, white guy. I doubt very seriously that you could find a policy handed down from on-high detailing the processes mentioned in the article. The actual “crime” was committed by the person on the other end of the line. Using either threat or reward the old white guy might have encouraged the behavior of the employee but you can’t prosecute the cutie who wants a new car – you have to prosecute boyfriend who stole it for her.

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avatar 6 Luke Landes

It would be impossible to put “corporate culture” on trial… but that’s what the government often tries to do when, for example, banking leaders are called to testify in front of Congress. Very rarely does anyone receive punishment. In this case, it’s a question of a particular corporate culture where Capital One looked another way while a third-party company was used to take advantage of consumers. You can’t blame the telemarketing workers at the company. You probably can’t find one person who said, “Let’s let this third party take advantage of our customers in return for a nice profit.” You get CEOs, COOs, and CFOs whose jobs are to look at the big picture rather than micromanage decisions, so they’re safe. You have middle managers who were more involved with the details but who were following corporate guidelines, “just doing their job,” and trying to “optimize shareholder value” with the hope for a performance-based bonus. No one person is to blame.

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avatar 7 Anonymous

Well said… so we wind up with administrative fines, refunds, and many people like [email protected] Counselor who feel frustrated that more targeted punishment is not forthcoming. There are many articles today about this and the other actions against banks that point out, correctly, that eventually the consumer will foot this bill – but that’s a whole other frustration.

avatar 8 Ceecee

My Dad once got snared by one of these. He took a phone call and because his hearing was not the best he just kept saying yeah……yeah…….yeah…….and one of those “yeahs” they took as his authorization to set him up on a special program, charged to his card. I had to jump through hoops to get it cancelled. I hope that after this, these sales pitches go away.

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avatar 9 wylerassociate

I never use Capital One but I am customer of ING Direct & now that Capital One owns ING, I want to see what impact in service & fees I am going to deal with.

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avatar 10 Anonymous

My girlfriend has a capital one card but to my knowledge she didn’t have any of these services. Will be interested to see if she ends up getting some sort of refund. Thanks for the heads up even though I don’t think it applies in my situation.

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avatar 11 Anonymous

I didnt know about this settlement but was actually looking at my mothers bill and noticed this buyer protection fee, which she told me she never authorized it. So i called and they said she has had it since 2000. I then found this settlement info, i hope that they will refund all the money they have charged her all these years.

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avatar 12 Anonymous

We just received one of these refunds, or at least I suppose that’s what it is, though it’s over a year since this article was written. It’s addressed to my brother’s estate. He died 10 years ago. The letter associated with the refund definitely does not indicate it is part of a settlement. It just says his account was review and it was determined he had not received all of the benefits of the service. If it’s a Capital One Issue why was the check issued by Bank of America? The amount is small so I doubt if my other brother will want to deal with the hassle of cashing it so I’ll probably never know if it’s legitimate or not.

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