Emulating actions by the U.S. Consumer Financial Protection Bureau, England's Financial Conduct Authority has ordered 11 big UK banks, including a Capital One subsidiary, to return "hundreds of millions of pounds" to consumers over "mis-selling" of unnecessary "card security" insurance that duplicates protection by law. In the past two years, the CFPB has ordered $1.5 billion in refunds to U.S. consumers duped by similar add-on subscription products sold by Bank of America, Capital One, JPM Chase, Discover and AmEx. The products sold to UK consumers were by a Stamford, CT based "loyalty club" marketer, Affinion, that has been the subject of enforcement actions by a number of U.S. state attorneys general and investigations by the U.S. Senate Commerce Committee under its recently retired chairman, Jay Rockefeller (WV). Affinion also marketed many of the junky add-on subscription based products that the CFPB's cases have been based on, as noted in its hometown paper, the Stamford Advocate.
As London's Daily Mail explained the scheme this week:
The UK’s biggest banks were last night accused of being ‘fundamentally corrupt’ after selling worthless insurance to up to two million customers. The victims included vulnerable customers who had contacted their bank after their credit card had been lost or stolen. They were then duped into paying for insurance to protect themselves against fraudulent transactions made on their replacement card. But the insurance was useless as banks are legally obliged to refund fraudulent payments to customers anyway.
In 2010, Senator Rockefeller was able to enact bi-partisan legislation, the Restore Online Confidence Act, to limit some of the worst loyalty club schemes, but only on the Internet. Due to committee jurisdictional wars common in the U.S. Senate, the law does not apply to banks.
Products in the "run away, run away!" junky add-on category typically are offered with a short 7-day trial period then billed to your card monthly for as much as $19.99 or more. The leading profit-makers for the clubs and the banks (which receive huge commissions) include credit monitoring, credit scoring, debt cancellation and payment protection schemes. The CFPB actions have also found disturbing patterns of banks not even providing the useless products they promised, but billing you for them anyway. I've often said, "If these products were any good, people would buy them, but they're not, so they trick you into paying for them instead."
The recent enforcement actions by the CFPB and the UK's FCA demonstrate the importance of maintaining strong, independent consumer enforcement agencies to prevent unfair practices, because even "legitimate" entities such as regulated banks may not treat their customers fairly. Of course, the banks do not agree that there should be a strong regulator to ensure that markets work fairly and protect the interests of consumers. The CFPB is constantly under attack by both Wall Street and its patrons on Capitol Hill not because it is dysfunctional (unfortunately there are agencies that meet this test) or "rogue" or "out-of-control" as its opponents allege. No, the banks (joined by the payday lenders, car finance companies, debt collectors and for-profit schools, among others) don't like the CFPB because it is an agency that works, and works well.