In a First, CFPB Targets Source of Add-Ons It Finds Dubious

WASHINGTON - The Consumer Financial Protection Bureau is ordering two vendors that sell credit card add-on products to pay nearly $10 million in combined fines and restitution for allegedly charging consumers for services never rendered.

The CFPB has already taken several actions against banks for improper marketing of a third party's add-on products. But the proposed orders against Affinion Group Holdings and Intersections Inc. were the first time the bureau directly hit vendors that provide such services, which include identity theft protection and credit monitoring.

Affinion and its affiliates, which are based in Connecticut and Tennessee, have agreed to pay a $1.9 civil money penalty and $6.8 million in redress to consumers who have not yet received a refund from the company. Intersections will pay a $1.2 million penalty and about $55,000 to consumers still waiting on a refund. Both orders are pending court approval and neither company admitted or denied wrongdoing.

"Consumers have every right to get what they pay for," said CFPB Director Richard Cordray in a press release. "But we are still finding that thousands of consumers paid for add-on benefits they were promised but never received. We continue to address unlawful conduct in this space and are signaling to other financial institutions and their service providers that their marketing and billing practices must be fair to consumers."

The CFPB alleges Affinion, and more than a handful of its affiliates, charged consumers full product fees on at least 73,000 accounts but did not provide the full credit monitoring or credit reporting retrieval that were promised. The CFPB's order covered alleged activity that occurred from about July 2010 through August 2012.

Affinion would enroll consumers by telephone but it could not provide the full service until the consumer sent a written authorization by mail, the CFPB said. Although it often took a while for consumers to mail the authorization, or Affinion would never receive it, the company would still bill customers, the agency said.

The CFPB also claims Affinion had "retention specialists" that gave consumers false information about services in order to avoid cancellations.

"For example, during some calls, Affinion retention specialists claimed they could directly remove inaccurate information from consumers' credit reports and raise their credit score as a result," the CFPB said. "In fact, Affinion had no control over the information contained in a consumer's credit report, and they could only help dispute it."

In a company emailed statement, Affinion said it has already addressed the legacy marketing practices cited by the CFPB.

"We voluntarily discontinued these marketing practices over three years ago and today's settlement allows us to put these issues behind us and move forward with the mission of providing consumers with the full benefits of our identity theft products in an easy and transparent way," Affinion said. "We support any measures that enhance the user experience and provide the information consumers need to protect themselves against the very real dangers of identity theft."

Meanwhile, the CFPB said the Virginia-based Intersections billed, or instructed banks to bill, about 300,000 consumers who had signed up for add-on products even though they were not receiving full services.

"As a result, the CFPB alleges consumers were charged fees even though Intersections could not provide the credit monitoring or other benefits for various reasons, including: failure to obtain a valid authorization from the consumer, fraud alerts on a consumer's credit file, and incomplete social security information, among others," the CFPB said. "In some cases, consumers paid for these services for several years without receiving the promised benefits."

Through Intersections' agreements with 35 banks, consumers generally paid $8 to $13 a months for such services. The order covered activities that allegedly occurred from 2009 to early 2013, the CFPB said.

Intersections has already refunded a "vast majority" of the 300,000 affected consumers partly because of earlier CFPB enforcement actions, the agency said.

"Intersections cooperates fully with our regulators, and has taken the steps necessary to correct the issue addressed in the consent order," the company said through a spokesperson. "We continue to work vigilantly to ensure that our customers receive the highest value from our products and services."