The Consumer Financial Protection Bureau (CFPB) has taken decisive action against First National Bank of Omaha, ordering the financial institution to provide substantial relief totaling $27.75 million to approximately 257,000 consumers. This action comes as a result of the bank’s illegal and deceptive practices related to credit card add-on products. Furthermore, First National Bank of Omaha is mandated to pay a civil money penalty of $4.5 million to the CFPB.
According to then CFPB Director Richard Cordray, First National Bank of Omaha betrayed the trust of its customers by enrolling them in credit card add-on products without proper consent and through misleading tactics. He emphasized the CFPB’s commitment to holding credit card companies accountable when they deceive consumers into purchasing unwanted products.
Headquartered in Omaha, Nebraska, First National Bank of Omaha, with assets totaling $18.4 billion as of March 2016, offered debt cancellation products like “Secure Credit” and “Payment Protection” and credit monitoring services such as “Privacy Guard” and “IdentitySecure”. The CFPB investigation revealed that from 2002 to 2012, First National Bank of Omaha engaged in deceptive marketing of debt cancellation products and unfair billing for credit monitoring services that were not fully provided.
Deceptive Practices Uncovered by CFPB
The CFPB’s order addresses unfair billing practices dating back to 1997 and deceptive enrollment tactics employed from 2010 to 2012. The investigation highlighted several key deceptive strategies used by First National Bank of Omaha:
Disguising Sales as Necessary Procedures
First National Bank of Omaha misled customers into listening to sales pitches for debt cancellation products by implying it was a mandatory part of the credit card activation process. Contrary to this, card activation was swift and did not necessitate enduring a sales presentation.
Distracting Customers to Secure Purchases
The bank confused consumers into purchasing debt cancellation products by suggesting they were free or required for account updates. Instead of clearly asking if customers wanted the product, representatives would confirm enrollment with unrelated questions, such as the consumer’s city of birth, obscuring the fact that a purchase was being made. In other instances, the sales representatives presented the product as a mere benefit or agreement to receive further information, downplaying the financial commitment.
Misrepresenting Eligibility for Debt Cancellation
First National Bank of Omaha representatives sometimes assured consumers of their eligibility for debt cancellation products even when customers had disclosed information that indicated they might not qualify for certain benefits. This included situations where consumers mentioned being retired, self-employed, or working part-time, which could affect their eligibility for benefits like unemployment coverage under the debt cancellation plans.
Obstructing Access to Debt Cancellation Benefits
The bank imposed stringent eligibility criteria and complex administrative procedures that effectively prevented most consumers from accessing the promised debt cancellation benefits. For example, pre-existing health conditions were grounds for denying coverage, with “pre-existing” defined broadly as any condition diagnosed or appearing up to six months post-enrollment.
Complicating Cancellation of Add-on Products
Despite marketing debt cancellation products as easily cancelable, First National Bank of Omaha trained its customer service representatives to make the cancellation process difficult. A sales incentive program rewarded representatives for retaining customers who attempted to cancel. Consumers often faced significant hurdles in canceling their enrollment, often requiring multiple persistent attempts to successfully opt-out.
Billing for Unfulfilled Credit Monitoring Services
Many cardholders were billed for credit monitoring services they never received. This was often due to the bank’s failure to properly process service authorizations. In other cases, credit reporting agencies could not match cardholder information to their files, preventing the activation of the monitoring services, yet billing continued.
Enforcement Action and Required Remedies
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to address unfair, deceptive, or abusive practices in the financial sector. The CFPB’s order mandates that First National Bank of Omaha undertake the following corrective actions:
Consumer Repayments
First National Bank of Omaha is required to repay an estimated $27.75 million to approximately 257,000 affected consumers. This includes refunds and additional relief for those subjected to deceptive marketing and unfair billing practices.
Cease Illegal Practices
The bank must cease billing consumers for add-on products if they are not receiving the promised benefits. Furthermore, First National Bank of Omaha is barred from marketing debt cancellation or credit monitoring add-on products until a comprehensive compliance plan is submitted to and approved by the CFPB. The bank is also tasked with reviewing and enhancing its policies to prevent future unlawful conduct.
Civil Penalty Payment
First National Bank of Omaha is obligated to pay a $4.5 million penalty to the CFPB’s Civil Penalty Fund.
This enforcement action was a collaborative effort between the CFPB and the Office of the Comptroller of the Currency (OCC). The OCC is also independently ordering restitution and imposing a $3 million civil money penalty concerning the unfair billing practices. This case represents the eighth coordinated action by the Bureau with another regulator and the twelfth action overall to combat illegal practices associated with credit card add-on products.
The full details of the CFPB’s Consent Order are publicly accessible. This action underscores the CFPB’s ongoing commitment to ensuring fairness, transparency, and competitiveness in the consumer financial market.
