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Capital One Slapped For Being Deceptive

Company misled credit card customers into signing up for unnecessary products.Capital One, which recently received bad marks from credit card customers over billing disputes and interest rates, has now been hit with a huge fine for deceptive marketing of unnecessary services.

The Consumer Financial Protection Bureau says Capital One will pay about $140 million to 2 million customers after pressuring or misleading them into signing up for payment protection and credit-monitoring services — services that are a huge waste of money.

The CFPB says eligible customers who enrolled in or tried to cancel one of these services on or after Aug. 1, 2010, will have refunds automatically credited to their accounts. Former customers who are eligible for a refund will have a check mailed to them “later this year.”

As part of the settlement, the McLean, Va.-based company also must pay millions of dollars in penalties to the federal government. (The Office of the Comptroller of the Currency also ordered Capital One to pay government penalties and refund an additional $10 million to customers.)

Before we get into what Capital One did to manipulate people into buying these products, let’s first talk a bit about what it was selling.

Payment protection: This is a program designed to cancel or defer payments if you’re laid off, disabled or die. Sounds great, right? Unfortunately the benefits for what you pay are tiny and difficult to collect. Avoid this marketing scheme.

Credit monitoring: This is a program marketed as a way to protect customers against identity theft. But such services don’t actually protect you from someone stealing your personal information. They just let you know sooner by alerting you to changes on your reports.

This isn’t a terrible service, but you don’t need to pay for it. You can get free credit monitoring from CreditKarma.com.

Selling these services — to customers with low credit scores or credit limits, I might add — didn’t get Capital One in trouble. How it sold them did.

Here’s what happened, according to the CFPB.

Call center employees:

  • Misled customers about the benefits of the products, sometimes suggesting purchasing the services could improve credit scores or lead to higher credit limits.
  • Failed to tell customers these services were optional.
  • Sold payment protection plans to people who were already unemployed and thus ineligible to receive benefits.
  • Misinformed customers about the cost of the services.
  • Enrolled customers into programs without their consent.

Most of us probably won’t be affected by the government’s enforcement action, but it serves as a reminder always to be wary about what the credit card companies are selling you.

Capital One has demonstrated it will go to great lengths to take what’s in their customers’ wallets.

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