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Chase to Refund Cardholders $309 Million for Credit Card Add-Ons

JP Morgan Chase Profits Jump 47 PercentThe Consumer Financial Protection Bureau ordered Chase and JPMorgan Chase to refund $309 million in charges to more than 2.1 million cardholders and pay a $20 million fine for illegal credit card practices.

According to the CFPB Chase charged cardholders between roughly $8 and $12 a month for “add-on” credit monitoring and ID theft protection services without the authorization of the cardholders. The “abusive practices” took place during a 7-year span from 2005 to 2012

The CFPB said in a statement that “in some cases, consumers paid for these services for several years without receiving all of the promised benefits…Consumers were under the impression that their credit was being monitored for fraud and identity theft, when, in fact, these services were either not being performed at all, or were only partially performed.”

The “add-on” fees caused some cardholders to exceed their credit limits, resulting in additional fees being charged. The CFPB says customers who still have their Chase credit cards will be issued credits to their accounts for the amount they were billed for the services. Cardholders who incurred additional fees as a result of the “add-ons” will also get those charges credited.

For consumers who are no longer Chase cardholders, they will receive checks in the mail by November 30.

CFPB Director Richard Cordray said “This order takes action against such practices and requires Chase to fully refund more than $300 million to consumers who were charged illegal fees.”

But the threat of fines is simply not enough to curtail the “add-on” practice. In 2012 the CFPB fined Capital One and American Express for similar marketing practices. But these and other credit card companies continue to sell add-ons to credit card customers.

Add-ons are big moneymakers for credit-card companies and will probably never stop. According to the Wall Street Journal, Discover earned $101.2 million from add-ons like payment and identity-theft protection in just one quarter last year. And, that was after being fined last year by the CFPB for similar “add-on” practices.

Credit card companies are more than willing to continue marketing add-ons to customers as long as complaints to the Consumer Financial Protection Bureau focus on deceptive marketing of add-ons rather than whether or not the add-on services actually benefit cardholders. 

Photo Credit: Chris Hondros /Getty Images

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