Capital One Bank Ordered to Refund $140 Million for Deceptive Marketing Practices

The  Consumer Financial Protection Bureau (CFPB), the child of the Dodd-Frank Wall Street Reform and Consumer Protection Act,  recently announced its first public enforcement action against Capital One Bank.  The CFPB ordered Capital One to refund approximately $140 million to two million customers and pay an additional $25 million penalty.  The CFPB’s investigation of Capital One’s practices determined that the bank used deceptive marketing tactics that pressured or misled consumers into paying for additional products that they didn’t  want or understand when they activated their credit cards.

CFPB’s examiners discovered Capital One’s call-center vendors engaged in deceptive tactics to sell the company’s credit card add-on products, such as payment protection and credit monitoring.   Call center agents allegedly used high pressure sales tactics against consumers with low credit limits or credit scores to mislead them into purchasing these products. Such tactics included: 

  • Misleading consumers about the benefits of the products, by leading them to believe that they would improve their credit scores and help them increase the credit limit on their Capital One credit card.
  • Deceiving consumers about the nature of the products by failing to inform them that their purchase was optional. Many of these consumers later had difficulty canceling when they called to do so.
  • Misleading consumers about their eligibility for payment protection benefits, which kicked in when consumers became disabled or lost a job.  Some call center representatives nevertheless sold the product to ineligible unemployed and disabled consumers. 
  • Misinforming consumers about the cost of the products, by leading to believe that the product was free. 
  • Enrolling consumers for various products without their consent.  Consumers who were automatically billed for a product they never ordered often had trouble cancelling the product when they called to do so.

To ensure that all affected consumers are repaid and that consumers are no longer subject to these misleading and high-pressure tactics, Capital One has agreed to:

  • Cease marketing these products until it submits a compliance plan, acceptable to the CFPB, which helps ensure these unlawful acts do not occur in the future.
  • Complete repayment, plus interest, to two million consumers who either initially enrolled in a product on or after August 1, 2010, or who tried to cancel a product on or after August 1, 2010, but were persuaded to keep the product after speaking with a call center representative. If the consumers are still Capital One customers, they will receive a credit to their accounts. If they are no longer a Capital One credit card holder, they will receive a check in the mail. Consumers are not required to take any action to receive their credit or check.
  • Pay claims denied based on ineligibility at enrollment. 
  • Capital One will make a $25 million penalty payment to the CFPB’s Civil Penalty Fund.

Compliance with the terms of this agreement will be assured through the work of an independent auditor, who will determine if Capital One has complied with the CFPB’s Consent Order.

If this enforcement action sounds familiar, it’s because it is.  Time and again, the Federal Trade Commission (FTC) has imposed similar sanctions against telemarketers who engaged in similar tactics while selling a host of products, including debt settlement, nutraceuticals, credit repair, home loan modification, and various products that feature ongoing continuity payments.

Although the additional regulatory burdens imposed by the creation of CFPB have not been welcomed by smaller companies marketing financial products, it may comfort them to know that the big boys are not immune.


Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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