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CFPB Observer: Recent Developments from Feb. 2-6, 2015

CFPB Enters Proposed Consent Order with Credit Card Issuer

On Feb. 3, the CFPB entered a proposed consent order with a Texas company that offered consumer credit cards. The CFPB originally sued the company in December 2014, alleging that the company falsely advertised its buying-club membership card as being a general-purpose credit card. In actuality, the card could only be used to buy the company’s products. Under the terms of the consent order, the company would be banned from offering consumer credit products or services and required to pay a $70,000 penalty.

CFPB Enforcement Action Against Subprime Credit Card Company

On Feb. 4, the CFPB entered a consent order with a subprime credit card company that allegedly charged illegal credit card fees. The credit cards sold by the company are marketed to consumers with poor credit and the products typically have low credit limits and high upfront fees.

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 prohibits credit card companies from charging consumers fees that exceed 25 percent of the credit limit during the 12-month period after opening an account. The company typically offered credit cards with initial fees that met the 25 percent fee limit. However, during the 12-month period after issuance, the company allegedly charged consumers certain other fees that exceeded the 25 percent cap. For example, the company imposed a $4.95 fee for receiving monthly paper statements. Although the service was optional, the default account feature was to charge the fee and to require the consumer to opt-out of receiving monthly paper statements by completing an online form. As a result, many consumers ended up paying the fee and the fee limit was exceeded.

Under the terms of the consent order, the company must pay a civil penalty of $250,000 and also refund approximately $2.7 million to the aggrieved consumers who paid the allegedly illegal fees.

CFPB Consumer Advisory Board Meeting

The CFPB will hold a Consumer Advisory Board meeting with Director Richard Cordray on Feb. 19 from 10:00 a.m. to 4:00 p.m. EDT at the CFPB’s offices in Washington, D.C. The meeting, which is open to the public, will focus on two topics: financial well-being and medical debt and implications for consumer information. The meeting agenda has been published. Attendees must RSVP for the event.