The Consumer Financial Protection Bureau last week entered into consent decrees with two credit card issuers over deceptive acts and practices.
In one case, the CFPB took enforcement action against a buying club that allegedly misled consumers into believing a credit card used to purchase club goods was a general purpose credit card.
In another case, the credit issuer was accused of misleading advertising by implying it was affiliated with unions when in fact it was not. In addition, the issuer charged excessive fees to “subprime” credit borrowers and misrepresented that certain security deposits were Federal Deposit Insurance Corp. insured when for a time they were not so insured.
Neither of these cases represent a departure from the CFPB’s use of deceptive acts and practices to target companies that it feels have crossed the line. However, the CFPB has not in any of these cases created clearer boundaries as to when financial institutions go beyond aggressive marketing into deceptive practices.
Obviously, to the extent an institution has designed a product that would be used or most attractive to “financially vulnerable” individuals the need for clarity and caution increases. The CFPB is focused primarily on protecting the financially underserved, and is more apt to impose significant penalties and apply stricter scrutiny to the extent any practices would target such individuals.
In addition, the CFPB seems acutely focused on “fees” targeting companies where such fees have not been accurately described or are excessive in regard to other credit terms. As such, when charging fees to borrowers with weaker credit histories, lenders should take great care to describe everything correctly and ensure such fees are not excessive.
Ari Karen is an attorney specializing in regulatory compliance at Offit Kurman.