The Consumer Financial Protection Bureau (CFPB) on July 18, 2012 announced its first enforcement action, which was taken in regard to allegations that approximately two million customers of Capital One Bank (Capital One) were misled into buying credit card “add-on products.” In an action that underscores our expectation that the CFPB will seek to utilize enforcement actions to send broad messages to the financial services industry about the type of conduct the agency will be looking to discourage, the CFPB at the same time released a bulletin to the industry describing its concerns in regard to the marketing of credit card add-on products.

The CFPB issued a consent order, as to which Capital One neither admitted nor denied the CFPB’s allegations. Significantly, the CFPB based its allegations on its much discussed authority to prohibit unfair, deceptive or abusive acts or practices. The CFPB alleged that its examination of Capital One led it to find that Capital One focused on credit card customers with low credit scores or low credit limits in marketing certain payment protection and credit monitoring services (Products). The CFPB alleged that Capital One engaged in a range of deceptive marketing practices in connection with the Products. The alleged practices included: misleading consumers about their eligibility for the Products, misleading consumers about the benefits of the Products and misinforming consumers about the costs of the Products.