The Consumer Financial Protection Bureau ordered Bank of America on Tuesday to pay about $727 million as part of a consent order related to the bank’s credit card add-on products. Bank of America will also pay $20 million in civil penalties. In all, it’s the largest enforcement action levied by the CFPB to date.
From 2010 to 2012, Bank of America marketed two credit card debt cancellation products. The CFPB found that Bank of America’s telemarketing scripts for these products contained misstatements. Also, telemarketers often went off script to make deceptive sales pitches that omitted key information. When credit card customers called Bank of America with an account problem, they would instead talk to a telemarketer who gave them a sales talk about the credit card add-ons.
Deb Morris, Deputy Enforcement Director for the CFPB, said the Bureau first found out about the deceptive marketing tactics during a supervisory examination of the bank. Bank of America stopped marketing and selling credit protection products in August 2012. By September 2013, the bank had cancelled all existing accounts, and it provided six months of no-cost coverage to consumers enrolled as of March 2013.
While this enforcement action is a uniquely huge step taken against a creditor, the debt collection industry needs to pay attention to the consequences. As the CFPB starts examining large collection agencies, any wrongdoing – or hole in the proof of what your agency is doing right – could trigger a CFPB investigation. Legally speaking, every single debt collection company – regardless of size – could be subject to a law enforcement investigation.
Specifically, the misleading telemarketing tactics that got Bank of America in trouble in the first place fall under the ever-growing umbrella of UDAAP (Unfair, Deceptive and Abusive Acts or Practices). In Tuesday’s press call announcing the enforcement action, CFPB Director Richard Cordray said that one of the central roles of the CFPB is to root out such UDAAP violations. Collection agencies should already know that UDAAP is the latest “hot” issue the Bureau is monitoring throughout the industry, and the burden of proof for compliance falls squarely on them.
insideARM.com is offering a webinar on May 1 at 2 p.m. Eastern to help collectors learn how to successfully survive an investigation or examination, while building a culture of compliance that will withstand CFPB scrutiny. insideCompliance: Victory Tales and Lessons Learned from Successfully Resolving a CFPB Investigation will use real-world examples of penalty-free exam closeouts to outline successful strategies for communication, documentation and advocacy when the CFPB knocks on your door.