By Jennifer Anderson-Kapke
The Consumer Financial Protection Bureau (CFPB) recently ordered Bank of America to pay over $700 million in relief to consumers harmed by practices relating to credit card add-on products. Such harmful practice fines are not limited to large financial institutions alone and this week the credit-card bank operated by outdoor retailer Cabela’s was fined $1 million by banking regulators and ordered to pay cardholders restitution for “deceptive and unfair acts.” Cabela’s practices led bank regulators to require Cabela’s to refund certain interest charges and reimburse cardholders for add-on services. The total amount of restitution remains undisclosed.
As a rule, credit unions hold themselves to higher safety and soundness standards than other financial institutions and these are just two of many examples why credit unions should continue to conduct business employing the high standards they are known for. They also need to make sure that they have implemented appropriate policies to address harmful practices should they ever arise and have a proper risk management system in place.
The practices leading to the fines and repayments that Bank of America and Cabela’s were ordered to pay are covered under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that prohibits committing unfair, deceptive or abusive acts or practices (UDAAP), as well as under the Credit Card Accountability, Responsibility, and Disclosures Act (CARD Act).