Many card companies dumping credit-protection plans

ByABC News
September 5, 2012, 9:12 PM

— -- Credit card holders could soon be saying good-bye to some costly add-on products that promised peace-of-mind during a disaster, such as a job loss.

And many consumer groups say good-riddance.

Several consumer advocates lump credit-protection plans in the category of an expensive type of insurance that most consumers don't really need.

All such offers are not dead, though, so consumers on the financial edge should move cautiously when it comes to promotions for debt-protection products and consumer insurance.

Credit card protection plans are under fire for deceptive marketing practices, and the Consumer Financial Protection Bureau has put all institutions on notice. One concern is that the third-party outfits that often pitch these products might mislead consumers.

Under a settlement with regulators, Capital One Bank will refund about $150 million to 2.5 million customers and also pay $60 million in penalties. Capital One said it believes the average refund will be less than $100.

Consumers are to receive checks if they no longer have Capital One accounts, or credits to their Capital One cards, later this year. Consumers do not need to take action.

Federal regulators charged that Capital One engaged in deceptive marketing tactics to pressure or mislead some consumers into buying payment-protection plans and credit-monitoring services when they activated their credit cards. Some consumers wrongly believed such products would boost their credit scores.

What other card issuers are doing:

•Bank of America quit pitching its Credit Protection Plus and Credit Protection Deluxe products in August and no longer offers the plans to new customers. The bank plans to exit that business next year. Existing customers will be given an additional six months of protection free, said Tara Burke, spokeswoman for Bank of America.

•American Express stopped offering its Account Protector program — a debt-cancellation product — earlier this year and will discontinue the plan on Dec. 31.

•Chase said it stopped offering its Chase Payment Protector plans to new enrollments in October 2011 but continues to serve existing customers. Customers can cancel at any time.

•Discover declined to comment but still offered a payment-protection plan.

•Citi Cards recently paused telephone sales for its debt-protection products and said it has reviews already underway, in line with new guidance recently issued by the CFPB. Citi continues to offer its Payment Safeguard program online but it stopped phone marketing of the product.

Ben Woolsey, marketing/consumer research director at, said one troubling issue with the protection plans involved hard-sell, fear-driven phone pitches that painted a picture of "Hey, you can lose your job." "

Yet, dishing out $10 or more a month for coverage does not mean that your entire credit card bill would be paid.

Typically, a credit-protection service would cover the required minimum monthly payment for a set time, maybe 18 months or two years.