If you have a credit card, watch closely.
About 6 million credit card users are going to receive money back on their cards. And it doesn’t matter if you have a rewards card or not.
The reward you are about to get is unique. It’s supposed to make up for abuses you might have received in the past few years and punish the businesses that tried to trick people into using certain cards or buying add-on protections they didn’t want or need.
The Consumer Financial Protection Bureau has been on a tear lately, going after a number of credit card-related businesses. The federal regulators have accused American Express, Discover and Capital One, or related firms that market the cards or collect payments, of deceptive practices. And as a result of settlements with them, consumers will be getting back about $425 million, and the government will be collecting $66.5 million in penalties.
If you are among those due money, you probably won’t know you’ve received anything back unless you watch your statement carefully for a credit. If you have closed a card that’s been a part of a settlement, you will receive a payment. There’s nothing you must do, and government regulators are warning people to beware of potential scammers. You shouldn’t pay anyone to get this money. Refunds are expected later this year or by mid-March.
Allegations vary depending on the card. In the most recent case, the CFPB accused American Express entities of promising some customers over the telephone that if they signed up for the Blue Sky Credit Card they would get a $300 refund. But the refunds didn’t happen. Also, the government claims people were charged illegal late fees and were talked into paying off old debts with the promise that payments would improve credit scores. Yet the debts were so old that payments wouldn’t have made a difference in the scores. And, according to the CFPB, the bureaus that score people’s credit were not informed that payments were made.
In addition, the government claims American Express discriminated against people older than 35 when granting cards.
Discover and Capital One were accused of misleading consumers with telemarketing add-on services that provided relief on payments under some emergency situations, such as losing a job. For example, the CFPB said customers who were already unemployed or disabled weren’t told that their claims would be denied. And Discover and Capital One telemarketers allegedly misled people about add-ons being free when they were not. In addition, some customers were given the add-ons and charged for them without their consent.
The refunds that individuals will receive relate to the questionable practices. For example, a person who has made use of protection related to a job loss would not be eligible for a refund. Refunds will be based on what people purchased and the length of time they held the add-on products.
The Consumer Financial Protection Bureau is a new organization that was established to police misleading lending practices after predatory mortgage lending received attention in the wake of the financial crisis. While consumer protection laws have existed for some time, consumer advocates claimed that responsibilities were not housed in a single agency and that financial companies were able to maneuver through the system.
The agency has been working with state regulators and other federal agencies, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., to stop deceptive financial practices.
Banks have been fighting to get the agency’s powers diminished and kept the initial head of the agency, Elizabeth Warren, from being confirmed.
The current director of the bureau, Richard Cordray, has said that more actions may be coming related to credit cards and debt collections. Yet he has suggested that by going after some of the elite players in the credit card business he is attempting to send a signal to other financial companies about deceiving customers.
Still there is a message to consumers, too, as deceptive practices are exposed: Watch your credit card bills, and be cautious about what you are buying.
Gail MarksJarvis is a personal finance columnist for the Chicago Tribune and author of “Saving for Retirement Without Living Like a Pauper or Winning the Lottery.” Readers may send her email at gmarksjarvis@tribune.com.
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