Capital One Offers Refunds Over Sales Tactics
20 April 2012 - 9:19AM
Dow Jones News
Capital One Financial Corp. (COF) is setting aside $75 million
for customer refunds stemming from employees who violated company
policy when selling products to credit cardholders over the phone,
its top executive said Thursday.
Richard Fairbank, chairman and chief executive of Capital One,
said it is offering refunds to customers who bought certain
products "over the past couple of years." Some sales employees
"didn't adhere to our scripts and sales policy when cross selling
products to our credit-card customers," Fairbank told analysts
during an earnings conference call.
Fairbank didn't say how many customers would be offered refunds,
how the employees in question violated company policy or when the
violation occurred. A Capital One spokeswoman didn't immediately
return a call for comment Thursday night.
The policies and scripts are in "place to ensure that our sales
practices meet our standards and unfortunately this didn't happen
in some cases," Fairbank said. "It's very important that we make
sure that all of our customers have bought the products in the
context that we exactly intended when we were selling."
Capital One is the fifth-largest credit-card issuer in the U.S.
by spending, according to the Nilson Report, a payments-industry
newsletter.
Credit-card issuers have been hit with lawsuits in recent years
over the sale of add-on services including identity-theft
monitoring, payment protection, which is advertised as a way to
help consumers in the event of a job loss or other hardship event,
and other products. Such services typically carry monthly fees.
The state of Hawaii last week said it filed lawsuits against
seven credit-card lenders, alleging they enrolled customers in such
services without their permission or used misleading sales tactics
when pitching the products over the phone. The seven issuers are
Bank of America Corp. (BAC), Barclays PLC (BARC.LN) Capital One,
J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C), Discover
Financial Services (DFS) and HSBC Holdings PLC (HBC). Capital One
is acquiring HSBC's U.S. credit-card business.
Discover has disclosed a probe by the Federal Deposit Insurance
Corp. and Consumer Financial Protection Bureau over its marketing
of payment protection and other fee-based services. The regulators
are likely to take a joint enforcement action against the
credit-card issuer, the cost of which could exceed $100 million,
Discover said in January.
Capital One's shares were up 1.6% at $54.77 in after-hours
trading after reporting strong first-quarter earnings.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214;
andrew.r.johnson@dowjones.com
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