By Peter Schroeder - 04/09/14 12:20 PM EDT
Financial regulators have ordered Bank of America to pay $772 million in fines and restitution for illegal credit card practices.
According to the Consumer Financial Protection Bureau, the bank used deceptive marketing practices in an attempt to sell add-on services to roughly 1.4 million consumers. Another 1.9 million consumers were illegally charged for credit monitoring and reporting services they never received.
Under the order, Bank of America will pay a $20 million penalty to the CFPB, and another $25 million to the Office of the Comptroller of the Currency. Customers that were subjected to deceptive marketing would receive $268 million in refunds and relief, and those charged for credit monitoring would receive $459 million from the bank.
The enforcement action marks the latest CFPB crackdown on financial institutions for improperly marketing and selling add-on products to credit cards. The regulator has pursued enforcement actions against four other financial institutions for similar issues. The probe into Bank of America’s practices originally began at the OCC, before it was handed off to the consumer agency.
According to the CFPB, Bank of America misled consumers when selling them credit protection services. Telemarketing scripts included misstatements, and the CFPB found some telemarketers went off script and omitted key information.
For example, the bank led some consumers to believe the first month of the service was free of charge when in reality, they would begin paying immediately, and only get those charges refunded if they cancelled within the first month.
The bureau also said the bank charged consumers “unfair” fees for credit monitoring. Those fees could exceed a consumer’s credit limit, which would in turn subject them to further fees. Some consumers never received the services they were sold, while others were misled into believing they were receiving further protection than they actually were.
Under the order, Bank of America will halt these practices and repay affected consumers.
The $20 million penalty will go into the CFPB’s civil penalty fund, which can be used by the bureau to pay victims or promote education and financial literacy programs.