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Personal Finance: Credit card penalty payments are arriving

Published: Sunday, Dec. 2, 2012 - 12:00 am | Page 1D

Tis the season … of consumer refunds.

In coming weeks, more than $425 million in refunds and restitution is going out to millions of consumers nationwide, thanks to a recent round of crackdowns on deceptive credit card practices.

And another $410 million – from Bank of America – is already landing in pockets of millions who got stuck with excessive debit card fees.

In most cases, no one's going to get rich off these settlements. In fact, folks will likely get back just pennies on the dollar.

But still, cash is cash. And a little extra in the wallet is always welcome.

Behind some of the payouts is the Consumer Financial Protection Bureau – a year-old federal agency launched in July 2011 to play "neighborhood cop" in policing the consumer financial market, everything from mortgages to student loans to credit cards.

Working with other federal agencies, the CFPB this summer and fall ordered three credit card companies – American Express, Capital One and Discover – to return a combined $425 million to consumers, primarily for misleading sales tactics.

"We think this is definitely a case of enforcement getting better," said Bill Hardekopf, CEO of credit card comparison site LowCards.com, who follows the credit card industry. He said the CFPB "is establishing the fact that they mean business. Their 'calling' is to look after consumers and they are trying to show that they will do just that."

With both the credit card and BofA rebates, consumers don't need to do anything to get their money. The companies are required to contact customers, whose refunds will be automatically deposited into an existing account. If they're not a current customer, they'll be mailed a check.

But be on the lookout if you think you're eligible. The checks are easy to mistake for junk mail that gets tossed in the recycling bin.

In the case of the Bank of America refund check, for instance, it comes as a small, white foldover card with a bar code on the front. The return address name is likely unfamiliar: "Rust Consulting Inc.," which is identified as the "Checking Account Overdraft Administrator."

If you get a BofA check, don't delay in cashing it: They're void in 180 days.

Here's a list of some of the recent refunds underway:

Bank of America

Roughly $410 million involves BofA checking or savings accounts – accessed with a debit card – between January 2001 and May 2011.

According to the class-action lawsuit that resulted in the settlement, BofA routinely processed debit transactions in order of highest to lowest amounts. Instead of debiting them chronologically in the order they occurred, the bank started with the highest amount – say a $1,000 rent payment. If that exceeded what was in the person's bank account, then every subsequent debit charge racked up overdraft fees, which typically are $35 per transaction. As a result, some consumers got dinged thousands in overdraft fees.

Dozens of banks – from Florida to Utah to California – have been hit with similar class-action lawsuits involving overdraft fees in recent years.

Although the BofA settlement was announced in November 2011, the legal wrangling wasn't finalized until a few weeks ago, when checks started going out to consumers.

We know folks who've received them for varying amounts: from as small as $2.55 and $9.09 to $85.40.

In most cases, those amounts represent just a fraction of what consumers paid in overdraft fees.

For more details on the BofA settlement, go to www.bofaoverdraftsettle ment.com or call (800) 372-2390.

American Express

Three AmEx subsidiaries were ordered to pay $85 million to about 250,000 cardholders for various illegal credit card practices between 2003 and spring 2012. The violations "occurred at every stage of the consumer experience, from shopping for cards, to applying for cards, to paying charges, and to paying off debt," said the CFPB.

The repayments include: unlawful late fees (with interest); $300 to those who didn't receive the promised bonus when signing up for AmEx's "Blue Sky" cards; $100 to those who were misled and denied cards for unforgiven debt amounts.

American Express customers are expected to receive payments no later than March 31.

Capital One

It's been ordered to pay $140 million to 2 million customers "who were pressured or misled into buying credit card products they didn't understand, didn't want or in some cases, couldn't even use," the CFPB said in a statement.

It said Capital One's call centers targeted consumers with low credit scores. When those customers called to activate their credit cards, "high-pressure" salespeople were misleading about the cost, eligibility and benefits of various products, such as job-loss "payment protection" or credit score monitoring.

Those customers will be reimbursed – with interest – for financial products purchased after August 2010. The repayments are expected to be delivered by the end of this year.


Accused of deceptive telemarketing tactics to sell various "add-on" credit card products, Discover is paying $200 million to more than 3.5 million consumers who were billed between December 2007 and August 2011.

Those extra products included credit score monitoring, as well as "protection" for identity theft, stolen wallets or delayed payments caused by job loss or hospitalization.

According to the CFPB, "Discover's telemarketing scripts often used language implying that the products were additional free 'benefits,' rather than products for which a fee would be applied to their accounts." It said the telemarketers often rushed through the portion of their script that discussed payments and terms.

All customers will receive at least 90 days' worth of fees they paid. The amounts vary, based on products purchased and how long a customer was billed.

The payments are expected to start in early 2013 and be concluded by mid-February.

In addition, all three companies are paying a combined $66.5 million in civil penalties to various federal agencies.

For details on the three credit card settlements, call (855) 411-CFPB or go to the CFPB's website: www.consumerfinance.gov. If you've had a problem with financial services, you can also file complaints with the CFPB by phone or online.

As the checks start rolling out, the CFPB is reminding consumers about potential scams involving the various refunds.

"When large numbers of consumers get refunds, scammers sometimes pop up," the CFPB warns on its website. "If someone tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to 'claim your refund,' it's a scam."

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