CFPB Orders Tech Company and Financial Institution to Pay Over $89 Million Related to Credit Card Partnership

The CFPB ordered a large tech company to pay $25 million in civil penalties and a national financial institution to pay over $19.8 million in redress and $45 million in civil penalties for mishaps related to the credit card that the two companies jointly introduced in 2019.

The CFPB found that, under the partnership, the tech company designed an interface that enabled users to manage their card accounts on its devices, while the financial institution extended credit to cardholders and serviced their accounts.  The tech company also offered cardholders the option to finance the purchase of some of its devices with interest-free monthly payments.  The CFPB found, however, that the partnership did not operate as planned and took action against the companies.  Both companies consented to the Bureau’s issuance of consent orders in which they neither admitted nor denied the Bureau’s factual findings and legal conclusions. 

According to the consent orders, the CFPB identified four specific issues with the card that it claimed were violations of federal law.  First, the CFPB found that several transactions that cardholders had disputed were not sent to the financial institution for further review.  The Bureau asserted that this lack of communication resulted in neither company investigating tens of thousands of transactions that cardholders had disputed.

Second, the CFPB claimed that, when cardholder disputes were received, they were not handled in compliance with federal law.  According to the Bureau’s findings, acknowledgement notices were not sent within thirty days of receiving disputes, reasonable investigations were not conducted, and letters with the results of the investigations were not sent within ninety days of receiving disputes.

Third, the CFPB claimed that marketing materials led consumers to think that they would automatically be enrolled in interest-free financing for the purchase of certain devices using the card.  But according to the Bureau’s findings, many cardholders were still charged interest because they had failed to take the necessary steps to select interest-free financing.

Fourth, the CFPB claimed that cardholders were misled about the refund process.  The Bureau found that, despite representations otherwise, refunds were credited to the portion of a cardholder’s balance that carried no interest, rather than the interest-bearing revolving balance.

In addition to the monetary sanctions, the consent order requires that the financial institution provide the CFPB with a plan that credibly shows how it will ensure compliance with relevant federal laws.