U.S Bank will be refunding an estimated $48 million to consumers in the newest round of settlements by banks due to illegal practices. The Minneapolis-based bank was found to have billed customers for identify protection and credit monitoring services which they never delivered.
The announcement came from the Consumer Financial Protection Bureau (CFPB) indicating that the bank will be making restitution to 420,000 customers, who signed up for Privacy Guard and Identity Secure. Customers believed that their accounts were being monitored when they weren’t. Current customers will receive a credit to their account, while others will get a check in the mail for their portion of the settlement.
U.S Bank will also be paying a $5 million civil penalty to the CFPB, as well as an additional $4 million penalty to the Office of the Comptroller of the Currency (OCC), a treasury agency which oversees national banks.
They are not alone. Bank of America, Chase, Discover, American Express and Capital One have all been sanctioned by the CFPB for similar offenses in the past. “We have consistently warned companies about practices related to add-on products and we will do what is necessary to prevent further harm to consumers,” said CFPB Director Richard Cordray.
A third party no-no
Privacy Guard and Identity Secure were administered for U.S Bank by a third-party vendor who registered customers into the programs for credit cards and other banking services including mortgage accounts.
As part of the sign-up process they needed to acquire the customers’ written consent, which was not done in some cases. People were billed as soon as they agreed to the service, but before they actually signed and returned the consent forms. Some individuals were billed for years.
More than just penalties
As part of the agreement with CFPB, U.S Bank must end their illegal billing practices and institute protocols to ensure that going forward this does not happen again. They are also required to beef up their management of third party vendors who handle add-on products and services.
The Consumer Financial Protection Bureau (CFPB) was given the authority to investigate these kinds of issues when the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. It gave them the ability to take action when companies and institutions take part in practices that are deceptive, abusive or unfair.