Bank of America Corp. (NYSE:BAC) agreed on Wednesday to pay $772 million in fines and refunds to settle U.S. regulators' accusations that it tricked people into buying extra credit card services they didn't need and charged others for credit card monitoring and reporting services that they never received.
The Charlotte, N.C.-based bank is the latest to reach an agreement with the Consumer Financial Protection Bureau and the U.S. Office of the Comptroller of the Currency, which made a joint announcement of the settlement. JPMorgan Chase, Capital One and several other financial services companies have also struck similar settlements, but the Bank of America agreement is the largest yet won by regulators over credit card add-ons, they said. About 2.9 million customers were affected in the Bank of America case, the agencies said.
The consumer protection bureau, which was created by Congress following the 2008 financial crisis, has been in operation since mid-2011. Specifically, regulators said that Bank of America telemarketers made sales pitches for two credit-protection products that were misleading about their costs and benefits.
Of the $772 million settlement, Bank of America will pay about $459 million to 1.5 million consumers who signed up for its credit monitoring services and said they were improperly billed while not receiving the full product services. The bank will also pay a $20 million penalty to the CFPB’s Civil Penalty Fund and $25 million to the comptroller's office for the unfair billing practices.
“Consumers paid at least $459 million in fees, interest and over-limit charges for these products without receiving full services," the CFPB said in a statement. "Today’s announcement recognizes the refunds Bank of America has already provided to consumers harmed as a result of the illegal billing practices relating to these identity theft protection products.”
Bank of America didn't admit or deny the claims. In a statement, the bank said that it had “stopped marketing identity theft protection products in December 2011 and credit card debt cancellation products in August 2012.” The bank also said that it had informed regulators of these issues two years ago and that it has issued refunds to most of its customers.
“Bank of America both deceived consumers and unfairly billed consumers for services not performed,” CFPB Director Richard Cordray said in a statement. “We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market.”
The CFPB's settlement with Bank of America is its fifth accord with a major bank over credit card add-ons. JPMorgan Chase & Co. (NYSE:JPM) agreed in September to pay $80 million in fines and $309 million in refunds for allegedly billing customers for identity-theft products they didn't receive. In 2012, regulators ordered Capital One Financial Corp. (NYSE:COF) to refund $150 million to more than 2 million of its customers for deceptive marketing of payment protection and other add-ons products sold with its credit cards.
“Instead of consumers receiving the protection they were promised, they were being illegally charged by one of the nation’s largest banks for little or no benefit to themselves,” Cordray said in reference to the Bank of America case.