Accounts Receivable Management Featured Article

Consumer Financial Protection Bureau (CFPB) Puts Credit Card Issuers on Notice

July 18, 2012

Accounts receivable management covers a broad scope of financial institutions, practices and regulations, thus it was not surprising that in the U.S. the newly created, controversial and ,as yet, not totally staffed Consumer Financial Protection Bureau (CFPB) as one of its first acts has turned its attention to the practices of credit card issuers. In its recently released bulletin, CFPB Bulletin 2012-06 it puts the credit card sector, and those wishing to provide such services, that deceptive practices for selling “add-on” products will not be tolerated. 

You have been warned

As the bulletin states:

Credit card issuers market various “add-on” products to card users, including debt protection, identity theft protection, credit score tracking, and other products that are supplementary to the credit provided by the card itself. This bulletin outlines the Consumer Financial Protection Bureau’s (“CFPB” or “the Bureau”) expectation that institutions under its supervision and their service providers offer such products in compliance with Federal consumer financial law. The CFPB will take all necessary steps to ensure that consumers are protected from deceptive sales and marketing practices, including those resulting from failures to adequately disclose important product terms and conditions, or other violations of Federal consumer financial law.

The bulletin goes on to say that it already is receiving complains about deceptive marketing. Just to name a few, these have included:

  • Failure to adequately disclose important product terms and conditions
  • Enrollment in programs without customer affirmative consent, or without realizing that they have been enrolled or are required to pay for the programs
  • Billed for services that were not performed or activated

Applicable consumer protections

The bulletin enumerates the various laws that govern such practices and the sections of the law that apply. The list is actually quite comprehensive, and it very specific about what is against the law. It includes:

  • The Dodd –Frank Act Prohibition Against Deceptive Practices: This defines what is a deceptive practice.
  • Truth in Lending Act/Regulation Z : The rules regarding account-opening disclosures and periodic statement obligations charge card application and solicitation disclosures.
  • Equal Credit Opportunity Act/Regulations B: Stipulating creditors may not discriminate based on race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract).

It goes on to state their expectations, noting that: “Institutions supervised by the CFPB should take steps to ensure that they market and sell credit card add-on products in a manner that limits the potential for statutory or regulatory violations and related consumer harm.” What then follows is an extensive list of what is to be taken as acceptable marketing behavior and the need to develop specific compliance management programs.

This is serious, just ask Capitol One

How serious is the CFPB about this?  The answer has already come. 

The CFPB this week ordered Capital One (News - Alert) Financial Corp. to reimburse $150 million to more than 2 million consumers who were in fact duped into purchasing credit-card products they didn’t need or understand. Capitol One also was fined $60 million to settle “deceptive marketing tactics.”  The fines include a $25 million civil penalty that is the CFPB’s first enforcement action. The Office of the Comptroller of Currency is to get $35 million in penalties.

The fines were the result of a finding that Capital One’s third-party call-center vendors were over-aggressive by pushing  individuals with low credit scores or low credit limits into add-on products when they called contacted the customer service to activate new credit cards. 

Not uncharacteristically Capital One blamed the vendors who “did not always adhere to company sales scripts and sales policies” and apologized to consumers. And, backing up the tough wording in the bulletin, CFPB director Richard Cordray said, “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.” 

Opportunity for ARM (News - Alert) service providers

For those providing accounts receivable management products and services, this appears to create a significant market opportunity, especially in the area of helping credit card issuers deal with the establishment and execution of compliance programs. As spelled out in the laws that apply here, especially Dodd-Frank, there is a lot to comply with and clearly being able to monitor compliance and remediate the risks of being in non-compliance is a place where technology is going to be critical.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. For more information on registering for ITEXPO click here.

Stay in touch with everything happening at ITEXPO. Follow us on Twitter.

Edited by Brooke Neuman

Article comments powered by Disqus

Related Accounts Receivable Management Articles

1-800Accountant to Distribute Small Business Workbench Tool

If you are a small to mid-sized business (SMB) one of your major challenges-along with attracting and keeping customers-is having a good handle on your cash flow and working capital. Large enterprises can afford the services and tools to give them the real-time view they depend on to run their businesses, but SMBs typically are not in the position to afford such capabilities. However, as with so many business processes, thanks to the Internet and mobile apps, good things can come in small packag… [ Read More ]

Wheelings and Dealings: Tiger Media to Acquire ARM Firm Interactive Data

As has been the case recently throughout the information and communications technology (ICT) industries this past year has been one that has seen a lot of M&A activity, especially in regards to anything that involves business process automation in general but also in specific verticals. This is a trend that is likely to accelerate in 2015. And, the Accounts Receivable Management (ARM) vendor segment has seen its fair share of such activities. [ Read More ]

The Beer Store Goes Live on VersaPay's ACRPay Platform

The VersaPay Corporation, a leading cloud-based payment services provider, recently announced that The Beer Store, a Canadian domestic beer distributor, has adopted VersaPay's ARCPay platform. Since going live on Dec. 3 it has become one of VersaPay's largest customers, The Beer Store benefits mainly from increased payment acceptance. [ Read More ]

Nextech Announces Compliance and Usability Upgrades in Latest Software Upgrade

For those not familiar with the nuances of the handling of Electronic Medical Records (EMRs), including their importance to accounts receivable and payable processes, it is unlikely that you are aware of an important mandated transformation currently underway. What I am referring to is the new regulation promulgated by the U.S. Department of Health and Human Services (HHS) on August 14, 2014 which set October 1, 2015 as the date healthcare providers must comply with rules regarding migration of … [ Read More ]
FREE Accounts Receivable Management enewslettter.


Weekly Live Demo
Contact Center Solutions

Register Today!

Weekly Live Demo
CaaS Small Center

Register Today!