Marketing for protections against ID theft, credit monitoring are under review
San Francisco, CA -- (SBWIRE) -- 10/20/2012 -- America’s biggest banks are taking a second look at extra services they offer to credit card holders.
Until recently, lenders have sold services such as identity-theft protection, debt protection and credit monitoring to their cardholders.
But in March, Chase stopped offering new debt-protection plans, said spokesman Steve O’Halloran.
Bank of America stopped its debt-protection and ID-theft protection programs in August, said spokeswoman Betty Reiss. And the bank ceased selling credit monitoring services last year.
A Citi spokesperson, Emily Collins, said debt-protection services linked to credit cards would no longer be offered.
Some may wonder why the big banks pulled back from these services. It may well be due to federal credit card rules that recently have taken effect.
“[W]e decided to stop selling debt protection products as we complete reviews in light of new regulatory guidelines,” Citi’s Collins wrote in an email, according to a report by Credit.com.
Bank of America and Chase declined to comment on changes in the add-on services.
The Consumer Financial Protection Bureau is beginning to get tough on lenders for the way they market and sell their extra services.
The agency’s first action resulted in Capital One agreeing to pay $165 million. It was found that Capital One deceived consumers, failed to reveal that its add-on services were optional and sold those services to customers who were not eligible.
American Express was found in October to have used deceptive marketing practices to sell add-on services, in addition to other findings. The company agreed to pay $85 million to customers and a $27.5 million fine.
Lenders have been put on notice about sales practices for add-on services. The bureau sent banks a letter warning about “failing to adequately disclose important product terms and conditions.”
Credit industry expert Barry Paperno questioned the benefits of add-on services to consumers.
“It’s well-known that many of these products have little value,” said Paperno, community director for Credit.com. “Some of these products prey on people who don’t understand” the products’ terms.
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