Credit card companies have long been accused of using deception in their marketing practices, which many believe contributed to the recent recession. This has caused outrage from consumers who feel they were misled. Many people in Texas and elsewhere are still suffering from overwhelming credit card debt as a result of underhanded tactics. One credit card company, Capital One Financial Corp., will be forced to answer for these unfair practices by paying $210 million to settle a major lawsuit.
The case was filed by the Consumer Financial Protection Bureau, which was created via the Dodd-Frank Act. The bureau was created to oversee consumer financial products. In this case, the bureau worked with the Office of the Comptroller of the Currency in order to work out a settlement deal with Capital One. The bank has agreed to pay between $140 million to $150 million in restitution to 2 million customers. It has also promised to pay $60 million in fines, even though the bank did not admit to nor deny any wrongdoing.
One of the deceptive practices involved misleading consumers about the need to add on additional financial products when they opened or activated their credit cards. These products included services such as payment protection and credit monitoring. The charges allege that the bank pressured consumers to buy the products, suggesting that they were required and not simply optional.
These additional financial products caused consumers to rack up unnecessary service charges and fees which only added to the overwhelming credit card debt that led many consumers to fall into serious financial troubles. The restitution payments will certainly help many people in Texas with their financial situations. However, for some this may not be enough, and some may turn to a Chapter 7 bankruptcy filing to discharge credit card and other forms of debt.
Source: Bloomberg Businessweek, "Capital One to Pay $210 Million in First CFPB Enforcement," Carter Dougherty and Dakin Campbell, July 18, 2012