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CFPB Orders Capital One to Refund $140M to ‘Upsell’ Purchasers

14 Aug, 2012 By: Linda A. Goldstein

The Consumer Financial Protection Bureau’s (CFPB) first public enforcement action against Capital One could have a serious impact on the future marketing of upsell products to credit card and bank customers.

The CFPB is the consumer protection agency created pursuant to the Dodd-Frank Act to regulate financial institutions and, like the Federal Trade Commission (FTC), has broad authority to prohibit unfair, deceptive and abusive acts or practices.

The enforcement action against Capital One resulted from the offering of certain upsell products, such as payment protection and credit monitoring services, by the bank’s call center vendors to consumers who called to activate their credit cards. The CFPB alleged that these call center vendors engaged in various unfair and deceptive practices including: misrepresenting the benefits of the products being offered; failing to clearly disclose that the purchase of these products was optional; misleading consumers into believing that certain of these products were free; enrolling consumers in these programs without obtaining affirmative consent; and misleading consumers about their eligibility for certain of the program benefits.

The CFPB has ordered Capital One to refund approximately $140 million – which represents all of the fees paid by approximately 2 million customers – and to pay an additional $25 million penalty. In addition to the consent order issued against Capital One, the CFPB also released a compliance bulletin for credit card issuers on the marketing of add-on products. Both the consent order and the compliance bulletin provide some important insight into how the CFPB is likely to view the marketing of these products.

First, the CFPB’s action makes clear that the agency intends to hold financial institutions strictly liable for the conduct of their third-party vendors. Capital One had contended that that its third-party call center vendor deviated from and failed to adhere to the scripts that Capital One had provided. The consent order and compliance bulletin make clear that the CFBP expects financial institutions to affirmatively monitor the actions of their vendors and that they will be held responsible for the actions of said vendors. The compliance bulletin requires that financial institutions should have written policies and procedures to ensure that the sale of upsell products complies with applicable laws and that there should be periodic quality assurance reviews including review of training materials and scripts, and real time monitoring and recording of telemarketing and customer service calls in their entirety.

Second, the consent order and the bulletin provide guidance into the types of disclosures the CFPB believes are necessary for the marketing of upsell products. In some respects, these go beyond even what the FTC has required in similar types of orders. For example, the consent order requires that the following disclosures be made immediately after the consumer indicates that he or she wishes to purchase an upsell product: that the consumer is purchasing the product; that the credit card will be charged; that the charge will appear on the consumer’s next billing statement; the cancellation policy and the phone number that the consumer can use to cancel and the refund policy. The order also requires that Capital One furnish the consumer with a written confirmation by mail of the material terms of the purchase within three business days.

Third, the fact that the CFPB has ordered full restitution to affected consumers plus a $25 million penalty indicates that this is an agency that is looking to impose significant penalties – far in excess of even what the FTC has historically ordered.

While the CFPB’s authority extends only to financial institutions, there is a risk that the provisions of this consent order and the compliance bulletin could be viewed as a model for future orders by FTC and/or state attorneys general, or as a roadmap for consumer class action lawyers in other cases involving upsells.

Linda Goldstein is chair of the Advertising, Marketing and Media division of Manatt, Phelps & Phillips, LLP, based in the firm’s New York office. She can be reached at

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