Most North Americans will know the Capital One campaign that always ends with the tagline, "what's in your wallet?" Now we know what's not in Capital One's wallet: $210 million, the amount of a government-imposed settlement for pressuring and deceiving card holders into buying products they could not use and did not want.
It’s the first case enacted since the Consumer Financial Protection Bureau (CFPB) was created by the Dodd-Frank bill passed by Congress two years ago to protect taxpayers and strengthen the financial industry against a repeat of the 2008 crisis which cost the United States 10 million jobs and $17 trillion in household wealth.
The CFPB announced their action July 18, addressing allegations that approximately two million customers of Capital One were misled into buying credit card 'add-on products,' alleging that credit card customers with low credit scores or low credit limits were targeted:
Those actions included: misleading consumers about their eligibility for the Products, misleading consumers about the benefits of the Products and misinforming consumers about the costs of the Products. Said consumers were referred to third-party vendors who applied “high-pressure sales tactics and made materially false, deceptive, or otherwise misleading oral statements relating to the cost, coverage terms, benefits, and other features of the add-on products that allegedly led consumers to purchase them.
What's more, when consumers tried to cancel such purchases, those same third-party vendors used deceptive marketing tactics to convince the consumers to keep paying for the add-on products, and consumers were charged full fees while in a pending status.
"When we became aware of this issue [at the end of 2011], we took prompt and decisive action to address the problem," responded Pam Girardo, Capital One spokeswoman, to Ad Age. "We immediately stopped all phone sales of the product, terminated our vendors' ability to sell the products and began work to identify impacted customers to provide full refunds."
The Center for American Progress’ report outlines five ways financial markets are stronger today as a result of the creation of the CFPB:
- A consumer watchdog is now on the beat.
- Every financial institution must now play by the rules.
- Increased capital requirements are now in place.
- Regulators now have the authority to wind down failing institutions.
- New rules will help rein in executive compensation.
“The financial crisis has taken a huge toll on the country—especially America’s middle class,” commented Jennifer Erickson, Director of Competitiveness and Economic Growth at the Center for American Progress. “The Dodd-Frank reforms were a critical step in the right direction to strengthen our markets and protect taxpayers from another collapse.”
As part of the settlment, Capital One has set up a $150 million fund for refunds to customers, will pay $25 million in penalties to the CFPB, and $35 million in penalties to the office of the comptroller of the currency — but regards the third-party vendor issue as an isolated problem and won’t proceed in an overhaul of its marketing and advertising to alter its image, reports Ad Age.
Former Wachovia CMO Jim Garrity commented to Ad Age that Capital One's target audience of younger men with a lower level of education and income are most likely unaware of the settlement and the brand damage will be minimal. Customers affected will collect around $100 each. "I doubt they're going to hate it," said Garrity.
As for Baldwin, he has donated proceeds from his appearances in Capital One ads, to the tune of $5 million plus, to charities that support the arts, including his beloved New York Philharmonic. No public comment from the recently remarried actor, by the way: he's no longer on Twitter.