Capital One told to repay credit customers

The U.S. Consumer Financial Protection Bureau flexed its muscles for the first time Wednesday and ordered Capital One Bank to repay millions of credit card customers allegedly tricked into buying add-on services.

Capital One will pay $210 million in refunds and regulatory fines. Most of the money will go directly to customers.

The bank's phone-sales operators told customers that services like payment protection was free or mandatory or offered more benefits than they did, federal officials said. The hard selling targeted people with poor credit, they said.

Capital One will pay up to $150 million to 2.5 million customers, $25 million to the CFPB and $35 million to the Office of the Comptroller of the Currency, a federal agency that oversees its banking operations.

"Consumers deserve to be treated fairly by their credit card issuer," CFPB director Richard Cordray said. He added that the problems are not isolated at Capital One and said he expects announcements about other companies.

CFPB officials observed heavy-handed sales tactics by workers at Capital One call centers as they monitored the bank's operations, the agency said in its order.

Agency officials reviewed records and phone scripts, interviewed managers and listened to taped calls with customers, the agency said. CFPB can oversee the biggest banks and certain other companies by stationing employees at their offices.

Regulators allowed Capital One to settle the matter without admitting or denying any of the facts that the agency alleged. Bank critics have complained about the use of similar language by the Securities and Exchange Commission to settle high-profile charges. They say the process lets banks buy their way out of problems and avoid deeper scrutiny.

Capital One blamed a third-party vendor for violating its instructions. Still, Capital One card division president Ryan Schneider apologized to customers in a note, adding, "We are accountable for actions that vendors take on our behalf."