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CFPB and New York Enter Into Consent Order over Credit Card Practices

By J. Riley Key, Lee Gilley & Jonathan R. Kolodziej on January 17, 2019
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CFPB and New York Enter Into Consent Order over Credit Card PracticesOn January 16, 2019, the Consumer Financial Protection Bureau (“CFPB”) and the Attorney General for the State of New York announced a consent order with Sterling Jewelers, Inc. (“Sterling”) related to Sterling’s credit card practices.

The consent order alleges that Sterling employees indicated they were either checking to see how much credit the consumer would qualify for or that the consumers were completing a survey or enrolling in a rewards program, when, in reality, Sterling was completing credit card applications for consumers without their knowledge or consent. The CFPB and New York characterized this conduct as a deceptive act or practice in violation of the Consumer Financial Protection Act of 2010 (“CFPA”). The CFPB and New York also alleged that this conduct violated the Truth in Lending Act’s prohibition against issuing a credit card except in response to an oral or written request or application.

The CFPB and New York also cited Sterling for violations of the CFPA related to alleged misrepresentations regarding certain financing terms, including the applicable interest rate, monthly payment amount, and eligibility for promotional financing. Finally, the CFPB and New York alleged that Sterling engaged in unfair acts or practices by enrolling consumers in optional payment protection plan insurance without informing consumers that they were being enrolled or by misleading consumers as to the product for which they were signing up.

Under the terms of the consent order, in addition to injunctive relief, Sterling is required to pay a $10 million civil money penalty to the CFPB and a $1 million civil money penalty to the State of New York.

While the CFPB has adopted a more business friendly approach since Director Richard Cordray’s resignation, this consent order illustrates the CFPB’s willingness to use the CFPA to pursue penalties related to conduct that it deems to be unfair or deceptive.

Credit card issuers would be wise to carefully review account opening practices to identify potential unfair, deceptive, or abusive conduct.

Photo of J. Riley Key J. Riley Key

Riley Key works with financial services clients across the country facing regulatory and enforcement challenges related to obligations imposed by the CFPB, as well as various other federal and state laws. Specifically, Riley helps clients navigate compliance with the Mortgage Servicing Final Rules…

Riley Key works with financial services clients across the country facing regulatory and enforcement challenges related to obligations imposed by the CFPB, as well as various other federal and state laws. Specifically, Riley helps clients navigate compliance with the Mortgage Servicing Final Rules in Regulations X and Z and the TILA-RESPA Integrated Disclosure Rule, as well as a host of federal and state regulations, including TILA, RESPA, FDCPA, FCRA, and ECOA. View articles by Riley.

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Photo of Lee Gilley Lee Gilley

Lee Gilley represents financial institutions, including banks, mortgage companies, debt collectors, small dollar lenders, and payment systems providers (credit cards, debit cards, prepaid cards, mobile payments, etc.) in litigation and regulatory matters related to compliance with the Card Act, ECOA, EFTA, FCRA, FDCPA…

Lee Gilley represents financial institutions, including banks, mortgage companies, debt collectors, small dollar lenders, and payment systems providers (credit cards, debit cards, prepaid cards, mobile payments, etc.) in litigation and regulatory matters related to compliance with the Card Act, ECOA, EFTA, FCRA, FDCPA, GLBA, HPA, RESPA, TILA, TCPA, CFPB regulations, and numerous other state laws and regulations. Lee is a member of Bradley’s Banking and Financial Services Practice Group, as well as the firm’s Payments and Small Dollar & Unsecured Lending industry teams.

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Photo of Jonathan R. Kolodziej Jonathan R. Kolodziej

Jonathan Kolodziej represents all types of consumer financial service providers in regulatory compliance, examination and enforcement matters. Through this work, he has assisted bank and non-bank mortgage servicers, mortgage originators, debt collectors, depository institutions, credit card issuers, small dollar lenders, reverse mortgage companies…

Jonathan Kolodziej represents all types of consumer financial service providers in regulatory compliance, examination and enforcement matters. Through this work, he has assisted bank and non-bank mortgage servicers, mortgage originators, debt collectors, depository institutions, credit card issuers, small dollar lenders, reverse mortgage companies, investment firms, and various industry trade associations.

Read more about Jonathan R. KolodziejEmailJonathan's Linkedin Profile
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  • Posted in:
    Banking, Finance and Securities
  • Blog:
    Financial Services Perspectives
  • Organization:
    Bradley Arant Boult Cummings LLP
  • Article: View Original Source

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