BofA agrees $772m credit card settlement

For Bank of America’s credit card customers, paying a little extra to the bank was a means to protect themselves against the worries of meeting card payments if they lost their job or became ill.

But US regulators found the bank had misled more than a million customers over products that were meant to make them feel more financially secure, in some cases charging them without giving them the promised protection or making the benefits sound much better than they were.

BofA on Wednesday became the latest big US bank to be fined for tricking customers into buying add-on credit card protection products. It agreed to a $772m settlement with US regulators, the largest of five similar credit card deals to be hammered out by the Consumer Financial Protection Bureau.

“We have seen several cases of deceptive marketing and illegal billing in this market. Here, Bank of America was doing both,” said Richard Cordray, director of the CFPB.

The CFPB added that telemarketers “often went off script to make sales pitches that were misleading and that omitted pertinent information”.

The settlement covers the sale of two credit protection products, which allowed customers to cancel credit card debt in the case of changing life events, such as involuntary unemployment or going to college.

The CFPB found that the bank sold identity protection without having the appropriate permissions from the customer to activate the product. BofA said it had stopped marketing both products by August 2012.

Of the $772m levied, the bank will pay only $45m in fines to regulators, with $727m refunded to consumers. The settlement included a $20m payment to the CFPB, the consumer regulator created from the Dodd-Frank financial reform legislation of 2010, and a $25m penalty to the Office of the Comptroller of the Currency.

BofA said: “The company has already issued refund payments to the majority of affected customers.” The bank neither admitted nor denied wrongdoing.

We have seen several cases of deceptive marketing and illegal billing in this market. Here, Bank of America was doing both

Last year, JPMorgan Chase had to refund $309m to customers and pay an $80m fine to settle allegations it wrongly charged consumers for credit monitoring programmes that they did not actually receive. Credit card companies American Express, Discover Financial and Capital One have also agreed to settlements with the CFPB.

BofA’s worst offences included misleading customers that the first 30 days of coverage were free of charge. In fact, they were charged for the products and then refunded if they cancelled within a 30-day period, according to the CFPB. The bank also told that they faced further steps to activate a product when in fact they had already been enrolled and were paying for the products, the CFPB said.

The regulator said the bank went as far as to promise a $25,000 “death benefit”, allowing customers to believe that this benefit was automatic when in reality customers had to submit paperwork and secure approval.

BofA last month agreed to a $9.5bn settlement with the Federal Housing Finance Agency over misleading mortgage sales practices.