In the latest crackdown on credit card add-on products, regulators Thursday ordered Chase Bank to refund $309 million to customers who did not get credit monitoring services they paid for.
Chase officials said the bank has already refunded the money due to credit card customers who signed up for the add-on service since 2005. The average refund per customer is about $147, which includes monthly fees for the products, plus any over-limit charges and finance charges that were triggered by the fees.
About 2.1 million customers have received either a credit on their bill or, in the case of ex-customers, a check in the mail for the amount owed to them, Chase spokesman Steve O'Halloran said.
Financial regulators filed an enforcement action against Chase on Thursday, saying the bank charged customers for credit monitoring even when it had not received the signed authorization necessary to obtain their information from credit bureaus, regulators said.
In essense, the bank sold an invisible shield. "Put simply, Chase was charging consumers for services that they did not receive," said a statement by Richard Cordray, director of the Consumer Financial Protection Bureau.
The two Chase banking units involved in the regulatory action also agreed to pay fines of $20 million to the CFPB and $60 million to the Office of the Comptroller of the Currency, which led the investigation.
Robo-signing criticized, too
Also on Thursday, the OCC ordered Chase to ensure it uses properly signed and verified documents in court cases to collect unpaid credit card debts and other non-mortgage debts. Chase was sued by California's attorney general in May for using robo-signed documents as part of a " massive debt collection mill ."
"We have taken extensive steps over the past two years to remediate the issues that affected customers and redesign our practices," said a statement by Bill Wallace, head of operations for consumer and community banking.
The penalty on Chase for credit monitoring products is the largest so far in a string of crackdowns on card issuers for problems with their add-on products , which included insurance-like payment protection plans as well as credit monitoring services. Last year, Discover agreed to refund about $200 million because of deceptive add-on marketing, and Capital One agreed to refund $150 million. Separately, American Express agreed to pay customers about $85 million for debt collection practices and deceptive marketing that did not involve add-ons.
Bank of America stopped offering identity theft protection in 2011 and payment protection in 2012. Spokeswoman Betty Riess told Creditcards.com that BofA has refunded ID theft protection fees to customers "who did not receive the full benefit of the service." The refunds should be complete within a month, she said. BofA would not say how many people received refunds, the amounts involved, or whether the identity theft product is the subject of a regulatory probe. Payment protection services were not subject to the refund, Riess said.
Wells Fargo stopped offering "credit defense" payment protection in 2012 except through its own representatives or via the Internet, and reduced the fees. Company representatives wouldn't comment on whether refunds were made to customers who signed up for the product through third-party vendors.
Regulators would not comment about any further enforcement actions.
Chase's add-on offer
Chase's add-on products were billed as providing identity theft protection and fraud monitoring, at monthly fees of $7.99 to $11.99. Chase stopped enrolling new customers in its credit monitoring products in mid-2012 and is in the process of discontinuing current users by the end of the year, Wallace said in a statement.
Once Chase enrolled customers, it outsourced the services to providers Corelogic Inc., True Credit, and Intersections Inc., according to the CFPB order. O'Halloran would not comment on whether Chase has plans to roll out credit monitoring again down the road.
For ex-credit card customers who had an overdue balance charged-off, Chase is supposed to reduce the amount owed by the refund due for credit monitoring, according to the regulatory order, and to inform credit bureaus of the reduced amount.
How to find the refund
Credits should have automatically come through on credit card notices in November or December 2012, as "ID/FRAUD PROTECT CREDT ," according to the CFPB. Checks sent to ex-customers by mail bore the legend "Important Refund Information" in red on the envelope, O'Halloran said.
See related: Credit monitoring: How (and whether) to choose