National Bank of Omaha Penalized for Illegal Credit Card Practices

The bank lured customers into add-on products and fake credit monitoring services

National Bank of Omaha Penalized for Illegal Credit Card Practices
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August 25, 2016

The Consumer Financial Protection Bureau (CFPB) has issued an order to First National Bank of Omaha to pay back $27.75 million to the approximately 257,000 consumers it harmed through illegal practices using credit card add-on products. It will also have to pay $4.5 million to the CFPB as a civil money penalty.

"First National Bank of Omaha violated the trust of its customers by illegally signing them up for credit card add-on products," said CFPB Director Richard Cordray.

The CFPB's order, issued under the authority of the Dodd-Frank Wall Street Reform and Consumer Protection Act, covers First National's unfair billing practices from 1997 through 2012 and its deceptive enrollment practices from 2010 through 2012. These practices were stopped after the CFPB made a supervisory exam.

The bank lured customers into purchasing add-on products for debt cancellation using deceptive marketing techniques. It also charged them for monitoring services for their credit that they never received.

From 2002 through at least 2012, First National offered debt cancellation products, such as "Secure Credit" and "Payment Protection," as add-ons to their credit cards, promoting them as if they provided a payment every month to the account of the cardholder if certain hardships occurred, such as involuntary unemployment, hospitalization, or disability. The cardholder was charged a monthly fee. In addition, it also offered products that supposedly monitored the customer's credit, such as "Privacy Guard" and "IdentitySecure," for potential abnormalities like identify theft and fraud, as well as to provide them with a copy of their credit report.

The bank concealed from consumers that it was selling them a product, making them listen to a sales pitch about debt cancellation add-on products by implying that they were required to stay on the phone while their cards activated. It distracted customers into purchasing products and deceived them into believing either that they were not making a purchase or that they would not have to pay for the product. It also deceived ineligible customers into believing that they were in fact eligible for the products.

Furthermore, after consumers had been lured into purchasing the debt cancellation benefits, the bank's eligibility standards and administrative requirements were so strict that most of the consumers were not able to obtain the benefits. Then the bank made it difficult for them to cancel the products, awarding customer representatives monetary incentives whenever he or she was able to keep the consumer enrolled when they tried to cancel and forcing consumers to demand cancellation numerous times successively.

Finally, many cardholders never received the credit monitoring services they paid for because the bank did not process their authorization correctly. Other times, some credit reporting companies could not process the authorizations because they could not match the consumer's information to their files.

Under the CFPB's order, First National must repay an estimated $27.75 million to the roughly 257,000 consumers it subjected to deceptive marketing or unfair practices, end its unfair practices, including the unfair billing of consumers for products they have not received, and pay a $4.5 million penalty to the CFPB.

The CFPB conducted its investigation together with the Office of the Comptroller of the Currency, which has issued a separate order for restitution and a $3 million civil penalty.