The Consumer Financial Protection Bureau issued its first enforcement action Wednesday, ordering Capital One Bank N.A. to pay $165 million for what the agency described as deceptive marketing tactics related to various credit card products.

Capital One, which entered into a consent order with the agency, must refund approximately $140 million to customers and pay a $25 million penalty, the agency said in a press release.

On top of the funds required by the CFPB, the Office of the Comptroller of the Currency ordered Capital One to pay an additional $10 million in restitution to customers plus $35 million in penalties, bringing the bank's total bill to $210 million.

The actions are the result of a CFPB examination that, according to the agency, found that Capital One's call-center vendors used deceptive tactics to sell add-on products to the bank's credit card customers.

Examples of these products, listed in the agency's press release, include a debt forgiveness plan to be used in the event of death or disability, and a payment protection plan allowing customers to request that the bank cancel up to 12 months of minimum payments.

"Today's action puts $140 million back in the pockets of two million 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," CFPB Director Richard Cordray said in a statement. "We are putting companies on notice that these deceptive practices are against the law and will not be tolerated."

The CFPB alleged that Capital One consumers were misled about the nature of the products, as well as their costs and potential benefits. In some cases, according to the agency, customers were also enrolled without their consent.

Capital One stated in a press release that its third-party vendors did not always follow the company's sales scripts and policies for payment protection and credit monitoring products, and the bank did not monitor the vendors' activities adequately.

"We are accountable for the actions that vendors take on our behalf," Ryan Schneider, president of Capital One's card business, said in a statement. "These marketing calls were inconsistent with the explicit instructions we provided to agents for how these products should be sold. We apologize to those customers who were impacted, and we are committed to making it right."

Under the consent order that Capital One signed, the bank agreed to stop all marketing of the products in question, and to delay resuming marketing until it submits an acceptable compliance plan to the CFPB.

The $140 million in refunds, which are expected to go out this year, work out to roughly $70 for each of the roughly 2 million customers affected. Those customers will also receive a refund of any associated finance changes and interest they paid.

The CFPB also released a compliance bulletin, notifying other financial institutions that it will not tolerate deceptive marketing practices, even those involving third-party vendors.

"Complaints received by the CFPB indicate — and the Bureau's supervisory experience confirms — that other consumers have been misled by the marketing and sales practices associated with credit card add-on products," the bureau stated in its press release. "Companies engaging in deceptive practices will be expected to refund fees paid by consumers and, particularly where practices are widespread, pay an appropriate penalty."

Bank industry officials have been wondering for months when the one-year-old agency created by the Dodd-Frank Act would issue its first enforcement action, as well as what lending area it would target.

In a recent interview with American Banker, Cordray declined to speculate on the timing but he suggested that a bank - as opposed to a nonbank lender - would likely be the target of the agency's first enforcement action.

This story was first published in American Banker, a Collections & Credit Risk sister publication.

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