The long-anticipated settlement between Bank of America Corp (NYSE:BAC) and two government regulators regarding the company’s deceptive credit card marketing practices has finally been announced.
The $772 million settlement includes $727 million in consumer refunds and $45 million in penalties, and settles allegations brought by both the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
Bank of America Corp (NYSE:BAC) did not admit or deny the allegations, according to a copy of the settlement made public by the CFPB.
Statement from CFBP head
“Bank of America both deceived consumers and unfairly billed consumers for services not performed,” said Richard Cordray, the director of the consumer agency. “We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market.”
Bank of America’s deceptive marketing practices
The settlement was related to how Bank of America Corp (NYSE:BAC) marketed credit-card product add ons such as identity-theft protection and debt cancellation if you lost your job.
A number of credit card companies have marketed these products aggressively to consumers, saying they would protect the cardholders from financial calamities. This is the fifth such settlement by regulators relating to credit card product marketing practices.
According to the documents released by the government regulatory agencies, one misleading practice involved the telemarketers promising customers that the first 30 days of the service were free when customers were actually being charged.
Bank of America Corp (NYSE:BAC) also sometimes deceived customers into believing they were merely agreeing to receive additional information about these services when the bank was actually enrolling customers in the services without their permission. In some cases, the charges for the services caused customer accounts to exceed their credit limits, triggering additional fees.
Millions of customers due refunds
The filings also pointed out that Bank of America Corp (NYSE:BAC) had engaged in these deceptive practices from 2000 to 2011, and the issue impacted 1.9 million customers. BoA said in a statement that it had already sent refunds to the “majority” of the customers involved.
