When it comes to paying extra money for services from their credit cards, many Credit.com readers admit to having mixed feelings. Are things like debt protection, credit monitoring and identity theft protection valuable products? Or are they overpriced services that offer little real value? One reader whose identity was stolen twice now pays for an ID theft protection service. He wonders whether he needs more protection, and whether it's worth the money.
"I have also considered using credit insurance, but the fees seem really exorbitant right now," the reader said recently in response to a Credit.com story. "Sort of like buying a latte every day even though you should save that extra money."
That indecision isn't just happening to Credit.com readers. It's affecting some of the nation's largest banks, too. After years of offering a full range of credit card add-on services, the three largest banks are pulling back. Chase closed its debt protection plans to new enrollments this March, says Steve O'Halloran, a Chase spokesman.
Bank of America stopped offering credit monitoring services late last year, and closed down its debt protection and identity theft protection offerings in August, Betty Reiss, a BofA spokeswoman, told Credit.com. Also in August, Citi announced that it would stop selling debt protection services connected to its credit cards, says Spokeswoman Emily Collins. All of which leaves the banks in a staggered position, with some banks offering some add-ons, others not, while most continue to offer add-on products for existing customers but declining to sign up new cardholders.
Spokespeople for Chase and BofA declined to say why their banks stopped offering add-on products. Citigroup was a tad more upfront. "(W)e decided to stop selling debt protection products as we complete reviews in light of new regulatory guidelines," Spokeswoman Emily Collins said in an email.
What Collins is talking about is a major crackdown by the Consumer Financial Protection Bureau on allegedly deceptive practices used by some major credit card issuers to market and sell these add-ons. The bureau's first-ever enforcement action, announced in July, found that Capital One deceived customers by claiming falsely that debt protection products would build their credit scores, neglecting to mention that the services were optional, and marketed add-ons to people who were ineligible (selling unemployment insurance to people who already were unemployed, for example). Capital One agreed to pay $140 million to two million victims, plus another $25 million in fines.
In October, the bureau reached another settlement, this time with American Express, finding that three of the company's subsidiaries used deceptive marketing to sell add-ons, and used illegal age discrimination to disqualify certain potential customers, among other findings. American Express will pay $85 million to 250,000 customers, and $27.5 million in fines.
The bureau also sent a warning letter to financial institutions, telling them that federal regulators are now on the lookout for other companies that try to sell add-on products to customers using "deceptive promotional practices" and "failing to adequately disclose important product terms and conditions," while enrolling people "in programs without their affirmative consent."