U.S. regulators on Wednesday ordered Bank of America Corp. (BAC) to pay $772 million in relief to consumers as well as in fines to regulators to settle allegations regarding the company's sale of services as add-on products to credit cards. This is the fifth such settlement and the largest by federal regulators with a credit-card provider over add-on products.
The Consumer Financial Protection Bureau or CFPB said Wednesday that roughly 1.4 million consumers were affected by Charlotte, North Carolina-based Bank of America's deceptive marketing of their add-on products. Bank of America also "illegally charged" about 1.9 million consumer accounts for credit monitoring and credit reporting services that they were not receiving.
As part of a consent order, the CFPB said it has ordered Bank of America to pay $727 million in relief to consumers harmed by practices related to credit card add-on products.
Bank of America must also pay a $20 million fine to the CFPB's civil penalty fund and another fine of $25 million to the Office of the Comptroller of the Currency or OCC for unfair billing practices of the identity protection products.
Richard Cordray, CFPB Director said, "Bank of America both deceived consumers and unfairly billed consumers for services not performed. We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market."
The CFPB noted that Bank of America consented to the issuance of the order by the regulator, but has not admitted or denied the allegations.
Bank of America had said in August 2013 that it was in talks with regulators to address their concerns over the company's sale and marketing of add-on products such as identity theft protection services and debt cancellation products it offered along with credit cards.
Credit-card companies had marketed these products aggressively to consumers, saying these would protect cardholders from identity theft or cancel their debt in the event of a job loss.
However, the CFPB began cracking down on credit-card companies for misleading consumers about the value of add-on products, as these provided little benefit to consumers and were said to have been marketed in a deceptive manner. Banks have largely stopped offering add-ons following criticism from regulators.
In 2013, the CFPB reached similar settlements with American Express Co.(AXP) and JPMorgan Chase & Co. (JPM) over credit-card allegations, while it reached deals with Capital One Financial Corp. (COF) and Discover Financial Services (DFS) in 2012.
BAC closed Wednesday's regular trading session at $16.62, up $0.18 or 1.09 percent on a volume of 83.10 million shares. In after-hours, the stock further gained $0.06 or 0.36 percent to $16.68.
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