BofA Pays Record $772M Settlement over Illegal Credit Card Practices

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Bank of America is paying $772 million in refunds and fines to settle government accusations that it misled roughly 1.4 million customers into purchasing additional credit card services and illegally charged approximately 1.9 million consumers for credit monitoring and reporting service they didn’t receive.

The Consumer Financial Protection Bureau (CFPB) announced the Bank of America settlement on April 9. It is the largest settlement over credit card “add-ons” ever won by federal regulators, who have been investigating the marketing practices of these products for the past three years. The CFPB reached similar settlements with Capital One and Discover in 2012, both for roughly $200 million each. Bank of America reached a $20 million class action settlement over its credit card add-on products the same year.

“We have consistently warned companies about illegal practices related to credit card add-on products,” said CFPB Director Richard Cordray. “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’s Bank of America settlement resolves allegations that the lender actively marketed two credit card payment protection products, “Credit Protection Plus” and “Credit Protection Deluxe,” with deceptive and sometimes blatantly false promises.

According to the CFPB, some of these misleading marketing practices included bank telemarketers telling customers that the first 30 days of the service was free when, in fact, customers were charged.

Bank of America also allegedly misled customers into believing they were merely agreeing to receive additional information about the add-on services. “In reality, Bank of America was enrolling these consumers in the products during these calls and then charging consumers for the products,” the CFPB said.

Bank of America also allegedly engaged in unfair billing practices by enrolling consumers in identity protection credit card add-on products, known as “Privacy Guard,” “Privacy Source,” and “Privacy Assist,” that promised to monitor customer credit and alert consumers to potentially fraudulent activity.

Under federal law, consumers must authorize access to credit information. Bank of America, however, billed consumers for these products without or before having the necessary authorization to perform credit monitoring and credit report retrieval services. As a result, the company billed consumers for services they didn’t receive; unfairly charged consumers for interest and fees; illegally charged approximately 1.9 million consumer accounts; and failed to provide product benefits.

In total, the bank billed 1.5 million customers a total of $459 million for unauthorized identity-protection products between 2000 and 2011. Bank of America also allegedly misled another 1.4 million customers into paying $268 million for credit-protection programs that were exaggerated or misstated.

In addition to refunding those fees, Bank of America will also pay a $20 million penalty to the CFPB  and $25 million to the Office of the Comptroller of the Currency.

Bank of America has admitted no wrongdoing, but in a statement said it had already discontinued offering the products in question and refunded “the majority” of affected customers.

More information on the Bank of America Credit Card Add-On Product Settlement can be found here at the CFPB’s website.