Updated with Capital One's response

In its first enforcement action, the Consumer Financial Protection Bureau has ordered Capital One Bank to refund $140 million to about two million customers. On top of that, the bank must pay a $25 million civil penalty.


The CFPB says it found that Capital One’s call center vendors pressured or misled consumers into paying for such services as payment protection and credit monitoring when they activated their cards. Consumers weren’t told these add-ons were optional, the CFPB says. And, the agency says, sometimes consumers were automatically enrolled in these programs without their approval and then had trouble canceling the services after being billed for them.

“We are putting companies on notice that these deceptive practices are against the law and will not be tolerated,” says CFPB Director Richard Cordray in a prepared statements.

Capital One surely got the notice

The bank must pay about $140 million to the consumers who were enrolled in these services on or after Aug. 1, 2010, or who tried to cancel these products at that time but were talked into keeping them by the call center. Plus, the card company will have to provide a refund for any interest, finance charges and over the limit fees that these products might have triggered.

If these duped consumers are still a customer of Capital One, they are supposed to see their refund applied as a credit to their account. If they’re not, they will get a check in the mail, the CFPB says.

The news gets worse for Capital One. The Office of the Comptroller of the Currency is issuing its own order against Capital One for deceptive marketing practices and unfair billing practices. According to the CFPB, the OCC is asking for $150 million in restitution -- which includes the $140 million the CFPB is mandating -- plus a $35 million civil penalty.

Not a good day for Capital One.

I contacted Capital One for a response and will post its response when I get it.

Update: In an email, Capital One responded:

“We are accountable for the actions that vendors take on our behalf,” said Ryan Schneider, President of Capital One’s Card business.  “These marketing calls were inconsistent with the explicit instructions we provided to agents for how these products should be sold. We apologize to those customers who were impacted and we are committed to making it right.”

Capital One says once it discovered the problem, it stopped all the phone sales of these products, refunded money to customers it identifed as having been affected, and increased oversight of its vendors so this won't happen again.

The bank also said that it decided to refund money to all customers who bought these products as of August 2010, even if calls to some of these customers weren't problematic. The typical refund will be less than $100 and go out later this year, the bank said.