The recent actions by the Consumer Financial Protection Bureau will put $425 million back into the hands of credit card consumers. That is the total amount of restitution that will be refunded to nearly six million credit cardholders as part of three settlements between credit card issuers and the CFPB.
During the past three months, the CFPB has taken action against American Express, Discover and Capital One, levying significant fines for either misleading consumers into applying for credit cards or buying add-on services.
Cardholders in line for a refund will automatically receive an account credit if the account is still open or a refund check in the mail if the account has been closed. No other action is required by the consumer. The refund will come no later than March 15.
In addition to these refunds to consumers, the three issuers had to pay a total of $66.5 million in penalties. The CFPB will receive $46.1 million of that penalty money--$7 million from Discover, $25 million from Capital One and $14.1 million from American Express. That money will go into the CFPB's Civil Penalty Fund.
Here is a summary of the refunds to consumers:
The company will reimburse approximately 250,000 cardholders an estimated $85 million. These payments will be mailed by March 13, 2013. American Express is paying the following restitution:
- Consumers who were misled into paying an old debt because they thought it would be reported to the credit bureaus will be reimbursed the full amount they paid plus interest.
- American Express will pay $300 to the customers who were promised that amount of money for signing up for a Blue Sky credit card.
- Consumers who paid an illegal late fee will be reimbursed the amount of that late fee plus interest.
- Consumers who were promised their debt would be forgiven and then denied new credit cards because the debt was not forgiven will receive $100 and a pre-approved offer for a new card with terms approved by the CFPB and FDIC.
Discover will pay approximately $200 million to more than 3.5 million consumers who were misled into buying add-on products between December 1, 2007 and August 31, 2011. Some were enrolled without providing consent.
The restitution goes to consumers who were misled by deceptive telemarketing and sales tactics used to convince consumers to pay for various credit card add-on products such as payment protection, credit score tracking, identity theft protection and wallet protection. Affected customers will receive restitution that is determined by the date they purchased and how long they had the add-on products. Payment is a minimum of 90 days' worth of fees. Approximately two million consumers will receive full payment of all the fees they paid.
Capital One will pay approximately $140 million in complete payment plus interest to an estimated two million consumers who were misled into paying for "add-on products" on or after August 1, 2010. This also applies to those who tried to cancel a product during that time period but were persuaded to keep the product by a customer service representative. Capital One will pay the claims that had been denied based on ineligibility at enrollment due to unemployment and disability.
The Consumer Financial Protection Bureau warns that scammers sometimes appear in these types of refund situations. Beware of anyone who tries to charge you, obtain your personal information, or asks you to cash a check and send a portion to a third party in order to "claim your refund." If you have problems with scammers, call the Consumer Financial Protection Bureau at (855) 411-CFPB.