Procurement News Notice |
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| PNN | 3058 |
| Work Detail | First National Bank of Omaha has been ordered to pay $27.75 million in relief to some 257,000 consumers who were harmed by add-on products to credit cards offered through the bank. The Consumer Financial Protection Bureau issued the order Thursday, tacking on a $4.5 million civil money penalty as well. The CFPB is a government agency created in Dodd-Frank legislation to protect consumers after the 2008 global financial crisis. Also, another federal banking agency -- the U.S. Office of the Comptroller of the Currency -- is ordering restitution as well as a separate $3 million civil penalty for the unfair practices, the CFPB said in the announcement. The CFPB said First National Bank used deceptive marketing to lure consumers into add-on products that were said to cancel their credit card debt in the event of unemployment, death or disability, in exchange for a monthly fee. Another add-on product was advertised to monitor the card holder’s credit. It was also offered for a monthly fee. The vast majority of consumers were unable to obtain several of the promised debt cancellation benefits, in part because they weren’t allowed to make a claim if they had pre-existing conditions, the CFPB said. Pre-existing conditions included medical conditions that occurred after they bought the add-on by up to six months. Customers also had trouble cancelling the add-ons, the CFPB said. CFPB Director Richard Cordray said the bank offered the products from 2002 until at least 2012, when the practices stopped after a CFPB supervisory exam. Response In response, FNB President Daniel K. O’Neill said both add-on products were discontinued when the bank realized there was a problem. The add-ons were handled by third parties, O’Neill said. The bank stopped contracting with those companies about four years ago. O’Neill agreed that cardholders may have been unknowingly enrolled in the debt cancellation, or may have been unable to cancel the product or properly claim benefits associated with the product. “If a product that First National Bank offers is this confusing to our customers, then it is a product we should not be selling,” he said. “While the bank did not intentionally mislead our customers, our oversight of the products and the vendor that administered these products was lacking. We did not provide our intended customer experience. For this, we provide our sincere apology.” O’Neill said the relief and penalty funds were reserved in expectation of the federal order and will not affect the bank’s future earnings. He said affected customers will receive an average of $110 per person. First National Bank of Omaha is headquartered in Omaha, with branches in North Platte and Fremont in Nebraska as well as cities in Colorado, Illinois, Iowa, Kansas, South Dakota and Texas. As of March 31, First National Bank had approximately $18.4 billion in total assets, the CFPB said. Specifically “First National Bank of Omaha violated the trust of its customers by illegally signing them up for credit card add-on products,” Cordray said. According to the CFPB, First National Bank of Omaha specifically: • Disguised the fact that it was selling consumers a product: The bank forced consumers to listen to their sales pitches about debt cancellation products by implying that they had to stay on the phone while their cards were activating. In reality, the card activation process was nearly instantaneous and consumers did not have to stay on the line and listen to the pitch to have their cards activated. • Distracted consumers into making a purchase: The bank led some consumers to believe they would not have to pay for the debt cancellation products. For example, the bank confirmed enrollment by asking for the consumer’s city of birth, not by asking if the consumer wanted the product. In other cases, the bank did not make it clear that consumers were making a purchase. For example, they made it seem like they were receiving a benefit, updating their accounts, or that the consumer was merely agreeing to receive more information about the product. • Failed to disclose consumers’ ineligibility: When marketing the debt cancellation products, the bank told some consumers they were eligible for the product even when the consumers had disclosed information suggesting they would be ineligible for some product benefits, such as that they were retired, self-employed or employed for less than 30 hours a week. • Hindered consumers from obtaining debt cancellation product benefits: The bank maintained strict eligibility standards and administrative requirements that prevented the vast majority of consumers from obtaining several of the promised debt cancellation benefits. For example, the bank would not cover consumers if they had pre-existing health conditions, but the bank defined pre-existing as any condition diagnosed or appearing for up to six months after consumers enrolled. • Made cancellation of debt cancellation products difficult: The bank marketed its debt cancellation products as easy to cancel but instructed its customer representatives to make cancellation difficult. It had a sales incentive plan that awarded its customer service representatives money for a “save,” which occurred when the representative kept a consumer enrolled after attempting to cancel. Consumers were often unable to cancel unless they were willing to demand cancellation multiple times in succession. • Billed for credit monitoring services not provided: In many cases, cardholders did not receive the credit monitoring services for which they paid because the bank did not properly process their authorization. In other cases, some of the credit reporting companies did not process the authorizations because they could not match the cardholder’s information to their files. This is the 12th action the CFPB has taken in total to address illegal credit card add-on practices, and the 8th action in coordination with another regulator, the CFPB said. |
| Country | United States , Northern America |
| Industry | Financial Services |
| Entry Date | 03 Sep 2016 |
| Source | http://www.northplattebulletin.com/index.asp?show=news&action=readStory&storyID=32554&pageID=3 |
