US Bank refunding $48M to credit card customers

By MARCY GORDON

AP Business Writer

U.S. Bank is refunding about $48 million in the latest federal settlement by a major bank over improper billing for extra credit card products that customers didn’t receive.

The Consumer Financial Protection Bureau announced the agreement Thursday with U.S. Bank, the sixth-largest bank by assets. The bank was ordered to repay about 420,000 customers who signed up for credit monitoring products and charged for services they didn’t receive. In addition, the Minneapolis-based company is paying $9 million in penalties to the CFPB and the Treasury Department agency that oversees national banks.

It was the latest in a string of sanctions against major banks over billing for credit card “add-ons,” which are optional products or services sold to cardholders at additional cost. Federal regulators have been examining the financial industry’s marketing of add-ons for several years, after consumer complaints and bank inspections alerted them to the problems.

The director of the CFPB, Richard Cordray, has said the agency will “continue cleaning up this market as necessary to ensure that consumers are treated fairly.”

The biggest settlement over credit card add-ons was with Bank of America Corp., which agreed in April to pay $772 million in fines and issue refunds to about 2.9 million customers. JPMorgan Chase & Co. paid about $309 million in refunds and $80 million in fines. The CFPB also has taken similar actions with American Express Co., Discover Financial Services and Capital One Financial Corp.

In the U.S. Bank case, the regulators said customers signed up for products that promised to monitor their credit and alert them to potentially fraudulent transactions. Customers were charged for the products as soon as they enrolled, without having given written authorization for the services. They were then billed for services they didn’t receive, and unfairly charged interest and fees, the CFPB said.

The fees sometimes pushed customers above the credit limits on their accounts, which led to additional fees. Under the agreement with the CFPB, U.S. Bank is reimbursing customers the amount they paid for the products, as well as interest and any over-limit fees they incurred.

Customers “may have been under the impression” that their credit was being monitored for fraud and identity theft, but in fact those services either weren’t being performed at all, or only partially, the agency said.

The add-on programs were serviced by a vendor, Affinion Group. U.S. Bank said it terminated its relationship with Affinion about two years ago.

In a statement, the bank said it intends to compensate the affected customers and issue an apology.

“U.S. Bank adheres to the highest levels of ethical business practices to ensure that customers confidently receive quality products and services from their bank,” the statement said. “We regret that errors occurred when our customers purchased credit monitoring and identity theft products from … Affinion, and that some of our customers did not receive the full benefit of those products.”

Affinion agreed to pay $30 million in a settlement last year with 47 states and the District of Columbia over allegations that it tricked consumers into signing up for discount club memberships.