U.S. Bancorp (NYSE:USB), headquartered in Minneapolis, has been ordered to refund $48 million to customers, as well paying a $5 million penalty to the CFPB and $4 million to the Treasury Department.
The CFPB was created after the financial crash to protect consumers, and has ordered refunds of $4.6 billion to over 15 million customers since 2011.
A continued crackdown on illegal practices
Historically, Bank of America Corp (NYSE:BAC) received the largest sanction, being told to repay $727 million due to illegal credit card marketing and billing. CFPB Director Richard Cordray said that his organization has “consistently warned companies about practices related to add-on products and we will do what is necessary to prevent further harm to consumers.“
The U.S. Bancorp (NYSE:USB) action is the seventh undertaken by the CFPB related to credit card add-on products. The bank overcharged 420,000 customers between 2004-2012, charging them for fraud and identity theft protection services without actually providing security.
The problems arose because U.S. Bank customers were charged for the services as soon as they enrolled, without their written authorization, which is generally necessary in order to provide credit monitoring services.
The U.S. Bancorp response
The credit monitoring programs, sold under the names “Privacy Guard” and “Identity Secure”, were marketed by the bank but administered by Affinion, a third party vendor.
A U.S. Bancorp (NYSE:USB) statement expressed regret at the errors and promised that the bank “will be compensating customers who did not receive full services from Affinion, and providing our apology.”
The bank terminated its contract with Affinion when it became aware of the problems around two years ago. The bank stated that affected customers will receive either credit to their account or a check in the mail.
The CFPB ruling stipulates that as well as repaying customers, U.S. Bank must strengthen its management and oversight of third party providers. The CFPB has also ordered that steps be taken to ensure that illegal billing practices do not occur again at the bank.