CFPB orders Chase and JPMorgan Chase to reform their practices and to refund illegal credit-card charges

Yesterday, the Consumer Financial Protection Bureau (CFPB) issued this order requiring Chase Bank and JPMorgan Chase Bank to refund around $321 million to consumers who were charged on their credit cards for add-on services that they did not receive. That's right, the CFPB found that these banks charged for things that their customers just did not get. As explained in the the agency's press release, consumers

  • Were charged for services they did not receive:
    Consumers were charged fees as soon as they enrolled in these add-on
    products, which include “identity theft protection” and “fraud
    monitoring.” Monthly fees ranged from $7.99 to $11.99 even though the
    promised services were not performed. In some cases, consumers paid for
    these services for several years without receiving all of the promised
  • Unfairly incurred charges for interest and fees:
    The unfair monthly fees that customers were charged sometimes resulted
    in customers exceeding their credit card account limits, which lead to
    additional fees for the customers. Some consumers also paid interest
    charges on the fees for services that were never received.
  • Failed to receive product benefits: Consumers were
    under the impression that their credit was being monitored for fraud and
    identity theft, when, in fact, these services were either not being
    performed at all, or were only partially performed.

Yesterday's order requires the banks to

  • End unfair billing practices: Consumers will no
    longer be billed for these products if they are not receiving the
    promised benefits. Chase also must take steps, subject to the Bureau’s
    approval, to ensure these unlawful acts do not occur in the future.
  • Complete repayment, plus interest, to more than two million consumers:
    Chase must pay a full refund, approximately $309 million, to more than
    two million consumers who enrolled in the credit monitoring product and
    were charged for services that were not received. In addition to the
    amount paid for the product, Chase must refund interest and any
    over-the-limit fees resulting from the charge for the product.
  • Conveniently repay consumers: If the consumers are
    still Chase customers, they received a credit to their accounts. If they
    are no longer a Chase credit card holder, they received checks in the
    mail. Consumers were not required to take any action to receive their
    credit or check. Most consumers should have received refunds by November
    30, 2012.
  • Submit to an independent audit: Chase has engaged
    an independent auditor to help ensure the refunds have been provided in
    compliance with the terms as set forth in the CFPB’s order.
  • Improve oversight of third-party vendors: The CFPB
    is also requiring that Chase strengthen its management of third-party
    vendors who manage these identity protection products.
  • Pay a $20 million penalty: Chase will make a $20 million penalty payment to the CFPB’s Civil Penalty Fund.

The agency's "explainer" tells the banks' customers how they will get (or have already gotten) their refunds: "Chase customers are not required to take any action to receive their
refund. Chase provided the refunds to the victims as an account credit
or as a check in the mail." That's different from what is done in some "claims-made" class-action settlements, where class members must go through a convoluted and unnecessary claims process (even where the defendant could have sent the relief directly to the customer-class members or credited existing accounts).

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