Thursday, November 7, 2013

Bank of America said to be in settlement talks over credit card products

Bank of America is in settlement talks with the Consumer Financial Protection Bureau over allegations it deceived customers in the sales of credit-card add-on products, Bloomberg reported Thursday, citing to two people briefed on the talks.

A deal is not imminent, as the Charlotte-based bank and the federal agency wrangle over the settlement's terms, the people said. A sticking point, according to one person, is the restitution the bank would pay customers.

Reached by the Observer, a spokesman for the bureau declined to confirm whether the agency is negotiating with the bank.

In January, a judge approved a $20 million settlement to compensate customers who bought the bank's Credit Protection Plus product. Customers paid monthly fees in exchange for credit card payments being canceled in the event of a job loss or other hardship. The settlement affects customers who claimed, among other things, that they were signed up for the product without their consent or that the product was not as advertised.

On Sept. 1, the bank stopped providing the credit protection to those who had still been signed up for it, according to its website. The bank also says it no longer offers an identity theft-protection add-on.

In regulatory filings, the bank has said it has been in discussions with regulators over the products. In a filing in August, the bank said it has been in talks with regulators to "address concerns" about the sale and marketing of its credit card debt-cancellation products. In the August filing, the bank said it might be subject to enforcement action and penalties from regulators. It also said it might be required to pay restitution or provide other relief to customers.

In another filing a year ago, the bank said regulators were looking at its identity theft-protection services. Issues regulators were interested in include "customers who may have paid for but did not receive certain of such services from third-party vendors" of the bank and "whether appropriate oversight existed." The bank has said it might face enforcement action from regulators and be required to pay penalties and restitution to customers.

Bank of America spokeswoman Anne Pace said in an email that the bank has refunded customers who did not receive the full benefits of the identity-theft product. She said the bank stopped marketing the identity-theft services in 2011. She declined to comment on the status of negotiations with the Consumer Financial Protection Bureau.

Bank of America is not the only lender to face scrutiny for credit card add-ons. Last year, Capital One Financial Corp. reached a $210 million settlement with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. The two agencies said the products had been sold through "deceptive" marketing.

The Capital One case was the first public enforcement action of the bureau, which had been created by the Dodd-Frank Act.

Including Bank of America, the bureau's investigation has reached all of the top six credit-card issuers, Bloomberg said. The bureau also reached settlements with American Express Co., Discover Financial Services and JPMorgan Chase & Co. In March, Citigroup said it may face penalties from regulators over the credit card products.