Do you think banks are your friends? If so, it might be time to think again.
If you’re over the age of 21 you probably remember the big mortgage crisis of 2008. You might also remember that the primary cause of this crisis was subprime mortgages issued by, you guessed it, the big banks. When you strip away the marble floors, free coffee and smiling tellers banks are not much different than automobile dealers. Their goal is to earn as much in profits as possible even if this sometimes requires deceptive practices – again much like auto dealers.
The money is in lending money
The way banks earn money is by lending money. The more money they can lend at high interest rates the more profits they earn. In short, banks don’t want us to be debt free.
They want us to be in debt.
The tricks the major credit card banks use to keep you in debt
Four years ago our Congress created the Consumer Financial Protection Bureau (CFPB). According to Wikipedia it’s, “an independent agency of the United States government responsible for consumer protection in the financial sector.” In its four-year history the CFPB has found numerous instances of where banks and credit card companies have used tricks or deceptive practices to cheat Americans!
Here’s the first example of why banks are not your friends. Two years ago, the CFPB ordered Chase Bank and JPMorgan Chase Bank to refund an estimated $300 million to more than 2.1 million customers because of illegal credit card practices. What were these esteemed financial institutions caught doing? They were enrolling consumers in credit card “add-on” products to monitor their credit and alert them to potentially fraudulent activity. Chase charged many of them for these products without or before getting any written authorization.
Due to these unfair billing practices, consumers were charged monthly fees ranging from $7.99 to $11.99 though they never received the services they were promised . Even worse, these unfair monthly fees sometimes resulted in Chase’s customers exceeding their credit card limits, which led to additional fees. Some consumers were even charged interest on the fees for services they never received.
Discover Financial Services discovered using deceptive credit card practices
In another case Discover Bank’s telemarketers were caught using deceptive language to convince its cardholders to pay for credit score tracking, identity theft protection, wallet protection and payment protection, which allowed certain customers to defer credit card payments for up to two years.
The scripts used by its telemarketers included many misrepresentations that implied these products were free and simply “added benefits,” while they actually cost either $7.99 or $9.99 a month.
Investigators from the CFPB listened to recorded sales calls where Discover’s telemarketers talked unusually fast when explaining the terms and cost of these products and in some cases even processed purchases without the customer’s consent.
The net/net of this is that Discover was required to refund $214 million to these customers.
American Express caught practicing unfair billing tactics and deceptive marketing
We’ve always thought of American Express as a solid, trustworthy financial institution. But we now know this isn’t always the case. Two years ago the CFPB ordered American Express to pay $59.5 million for illegal credit card practices. These practices included unfair billing and deceptive marketing with respect to, once again, its “add-on products”. In addition, American Express was required to pay the CFPB an additional $9.6 million in civil penalties.
Bank of America now seems to be more like the Bad News Bank
If you were surprised to learn that American Express had to pay $59.5 million for its credit card practices, check this out. Bank of America agreed last year to pay $727 million in penalties because it had deceived millions of customers into buying costly and unnecessary services when they signed up for its credit cards.
These services were basically credit protection products that promised customers debt cancellation or debt deferment designed to shield them from unforeseen economic problems. This affected roughly 1.4 million consumers. Plus, the Bank also illegally charged about 1.9 million consumer accounts for credit monitoring and credit reporting services but never provided them. Like American Express, Bank of America has also been required to pay a civil money penalty to the CFPB of $20 million.
Bank of America also was found to be using unfair billing practices.. This resulted in about $459 million in harm to consumers. Customers may have thought their credit was being monitored for identity theft and fraud when, in fact, they did not receive either of these services or received only a portion what they had been promised.
The granddaddy of them all – Citibank
However, the granddaddy of them all is 4-Citi (CitiBank), which was ordered to pay more than $700 million to consumers due to its credit card practices. It was also required to pay $35 million each to the CFPB and to the Office of the Comptroller of the Currency.
The CFPB went so far as to note that Citibank really screwed over consumers with debt protection. In fact, according to the CFPB roughly seven million consumer accounts were affected by the bank’s deceptive billing, marketing and administration of debt protection and credit monitoring add-on products.
In addition, Citibank used unfair billing practices. As an example of this it billed customers for credit monitoring or credit report retrieval services without having the authorization necessary to actually do them. In other cases it charged consumers for benefits they did not receive. And finally, it was found to have been engaged in deceptive collection practices.
Providian and unfair and deceptive banking practices
In yet another case the Controller of the Currency (OCC) reached a settlement with Providian National Bank due to its unfair and deceptive trade practices. This agreement called for the payment of at least $300 million to affected consumers and the damages may climb higher. In fact, the OCC has stressed that the $300 million is just the minimum amount that Providian must repay.
U.S. Bank nicked for $48 million
U.S. Bank has been nicked by the CFPB to the tune of $57 million in refunds and penalties for allegedly deceptive banking practices. This was $48 million in refunds and a $5 million penalty to the CFPB and $4 million to the U.S. Treasury Department. According to CFPB U.S. bank charged more than 400,000 customers for mortgage loan, credit card and checking account add-ons. These products were supposed to monitor their accounts for identity theft and fraud but no monitoring was ever done.
If you can’t trust good, old GE, who can you trust?
GE capital has also been caught practicing deceptive and discriminatory credit card practices and will pay an estimated $225 million. According to the CFPB, GE Capital (now known as Synchrony bank) must refund $56 million to about 638,000 consumers who were subjected to deceptive marketing practices. It must also pay $169 million to roughly 108,000 borrows that were excluded from debt relief offers because of their national origin. Its deceptive practices related to, once again, add-on products. And, oh, the people it discriminated against were residents of Puerto Rico who preferred to communicate in Spanish and as a result were not offered these products.
Capital One Bank ordered to refund $140 million
The CFPB required Capital One Bank N.A. to refund about $140 million to two million customers and to pay an additional $25 million penalty. According to CFPB’s director Rich Cordray this puts about $140 million back in the pockets of Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use. This once again had to do with add-on products such as payment protection and credit monitoring that was sold using high-pressure tactics when customers called to activate their credit cards.
Wait, wait there’s more
If all this were not enough the CFPB recently ordered J.P. Morgan Chase to refund about $50 million and stop collecting on 28,000 accounts. This was because Chase had been selling credit card accounts to debt buyers that included amounts that were inaccurate or debts not actually owed by its customers. The debt buyers then, of course, sought to collect on the faulty debts it had purchased from Chase. In addition, Chase filed more than 528,000 lawsuits against consumers to collect on debts where sworn documents had often been used that were “Robo-signed” and never verified for accuracy. Because of this, Chase was required to refund at least $50 million to consumers and stop collecting on all these accounts.
So, whom can you trust?
It’s pretty clear you need to watch your step when dealing with the banks. As you read earlier in this article their goal is not to get you out of debt. It’s to nick you for every possible penny even if it means tricking you. The major credit card banks want to keep you in debt for as long as possible, making your minimum monthly payments at 15% interest or more for years and years, lining their pockets with billions of dollars a year for their shareholders.
If you are drowning in debt it’s going to be hard to get out of debt on your own. It’s not impossible but using a debt relief company’s expertise can help you cut down the time it takes to resolve all your credit card debt to 2-4 years. In fact, our single, most important goal is to help consumers be out of debt because if we are unsuccessful we earn nothing. And that sounds like a pretty good deal to us…unlike some of these major credit card banks’ action.