On July 18, the Consumer Financial Protection Bureau (Bureau or CFPB), in connection with the settlement of its enforcement action for allegedly deceptive acts against a major U.S. financial institution, issued guidance in the form of a bulletin to credit card issuers with respect to certain "add-on" products marketed in connection with the issuance of credit cards. In this respect, the Bureau noted that "credit card issuers market various “add-on” products to card users, including debt protection, identity theft protection, credit score tracking, and other products that are supplementary to the credit provided by the card itself." Citing a need for the guidance, the Bureau noted that "CFPB supervisory experience indicates that some credit card issuers have employed deceptive promotional practices when marketing the products, including failing to adequately disclose important product terms and conditions. In addition, some consumers have been enrolled in programs without their affirmative consent, or without realizing that they have been enrolled or are required to pay for the programs. Others have been billed for services that were not performed or activated. Consumer complaints received by the CFPB also indicate that consumers have been misled by the marketing and sales practices associated with credit card add-on products."
Importantly, the Bureau indicated, albeit in a footnote, that "although this bulletin focuses on credit card add- on products, institutions should take the guidance that it provides into consideration when they offer similar products in connection with other forms of credit or deposit services." The bulletin notes that deceptive practices could violate the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices, the Truth-in-Lending Act, and the Equal Credit Opportunity Act. The Bureau also listed its expectations in connection with add-on products, including ensuring that:
- Marketing materials, including direct mail promotions, telemarketing scripts, internet and print ads, radio recordings, and television commercials, reflect the actual terms and conditions of the product and are not deceptive or misleading to consumers;
- Employee incentive or compensation programs tied to the sale and marketing of add-on products require adherence to institution-specific program guidelines and do not create incentives for employees to provide inaccurate information about the products;
- Scripts and manuals used by the institution’s telemarketing and customer service centers:
• Direct the telemarketers and customer service representatives to accurately state the
terms and conditions of the various products, including material limitations on
eligibility for benefits;
• Prohibit enrolling consumers in programs without clear affirmative consent to purchase
the add-on product, obtained after the consumer has been informed of the terms and
• Provide clear guidance as to the wording and appropriate use of rebuttal
language and any limits on the number of times that the telemarketer or customer
service representative may attempt to rebut the consumer’s request for additional
information or to decline the product; and
• Where applicable, make clear to consumers that the purchase of add-on products is
not required as a condition of obtaining credit, unless there is such a requirement.
- To the maximum extent practicable, telemarketers and customer service representatives do not deviate from approved scripts;
- Applicants are not required on a prohibited basis to purchase add-on products as a condition of obtaining credit; and
- Cancellation requests are handled in a manner that is consistent with the product’s actual terms and conditions and that does not mislead the consumer.
In addition, institutions that offer credit card add-on products should employ compliance management programs that include:
- Written policies and procedures governing credit card add-on products designed to ensure compliance with prohibitions against deceptive acts and practices, Truth-in-Lending Act, Equal Credit Opportunity Act, and any other applicable Federal and state consumer financial protection laws and regulations;
- A system of periodic Quality Assurance reviews, the scope of which includes, but is not limited to, reviews of training materials and scripts, as well as real-time monitoring and recording of telemarketing and customer service calls in their entirety, consistent with applicable laws;
- Independent audits of the credit card add-on programs, which address the items listed above and consider whether these programs present elevated risk of harming consumers;
- Oversight of any affiliates or third-party service providers that perform marketing or other functions related to credit card add-on product so that these third-parties are held to the same standard, including audits, quality assurance reviews, training, and compensation structure;
- An appropriate channel for receiving, investigating, and properly resolving consumer complaints related to add-on products; and
- A comprehensive training program for employees involved in the marketing, sale, and operation of credit card add-on products.
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