What can we learn from the CFPB's first enforcement action?

• Author: Pry, Carl G.
• Position: MARKETING COMPLIANCE

AFEW POINTS ARE ABUNDANTLY CLEAR FROM A READING of the Consumer Financial Protection Bureau's first enforcement action against one of the country's largest credit card issuers. As expected, the focus was Unfair, Deceptive, or Abusive Acts or Practices (UDAAP); specifically deceptive practices when marketing "add-on products" to credit card customers.

* Penalty amounts will be large. The $210 million total payout is larger than any tine levied by the Federal Trade Commission (which enforces Unfair or Deceptive Acts or Practices laws). The CFPB's unstated opinion is that past penalties have not stopped banks from profiting from unfair and deceptive practices. Higher amounts get everyone's attention.

* The CFPB targeted specific practices, not products. Cancellation practices, marketers' scripts, and sales practices were the focus of the order, not the add-on products themselves. Some believed the CFPB would target particular products for UDAAP criticism. This was not the case here; the "P" in UDAAP still stands for "Practices" thus far.

* The CFPB is clear in what it wants the industry to do. Fortunately the Bureau chose an educational approach rather than "learn from others' mistakes." Along with the enforcement action itself, the CFPB published a Bulletin (.2012-06, found at http://files.consumerfinance.gov/f/201207_cfpb_marketing_of_credit_card_addon_products.pdf) that lays out "expectations" for banks to follow.

Quotes from the CFPB Bulletin

The Bulletin is an important learning tool and is useful to all banks, not just sellers of ancillary credit card products or banks that offer credit cards. The Bureau offers a roadmap for what it will consider UDAAP to be in sales and marketing. Note a few quotes from the Bulletin citing unacceptable practices:

* "Deceptive sales and marketing practices, including those resulting from failures to adequately disclose important product terms and conditions."

* "Some consumers have been enrolled in programs without their affirmative consent, or without realizing that they have been enrolled or are required to...