On Wednesday, the Consumer Financial Protection Bureau (CFPB) leveled its first public enforcement action, an order requiring Capital One Bank to refund approximately $140 million to nearly two million customers and pay a $25 million penalty.

The action, announced on July 18, was made in coordination with the Office of the Comptroller of the Currency (OCC). It resulted from a CFPB examination that identified “deceptive marketing tactics” used by Capital One's vendors “to pressure or mislead consumers” into paying for add-on products.

According to the CFPB, examiners discovered Capital One's call-center vendors engaged in deceptive tactics to sell products like “payment protection,” allowing consumers to forgo up to 12 months of minimum payments when facing unemployment or temporary disability, and debt forgiveness in the event of death or permanent disability. Another product promised credit monitoring, with identity-theft protection, access to “credit education specialists,” and, in some cases, daily monitoring and notification services.

The CFPB alleges that consumers with low credit scores and low credit limits frequently faced “high-pressure tactics” from call-center vendors when they called to have new credit cards activated. Representatives allegedly misled them about the benefits of the products, such as suggesting that an add-on would improve their credit scores and help boost credit limits.

Consumers were also not always told that buying the products was optional and wrongly informed that they were required to purchase the product in order to receive full information about it. Although promised they could subsequently cancel, many later had difficulty doing so. Consumers were sometimes led to believe that they would be enrolling in a free product, rather than making a purchase, and some call center vendors processed add-on product purchases without consent.

Although payment protection benefits did kick in as promised for many, some call center representatives marketed and sold the product to ineligible unemployed and disabled consumers, according to CFPB. Despite paying the full fees, they could not get all the benefits of payment protection and some later filed claims that were denied because their loss occurred prior to enrollment.

Capital One has agreed to a CFPB consent order that it cease selling the cited products until it submits an approved  compliance plan that will “address the manner in which marketing and soliciting” them can occur.

The compliance plan mandates how future disclosures are made to consumers. Written information must be “written in a type size and location sufficient for an ordinary customer to read” and “in a manner that would be easily recognizable and understandable.” Verbal sales pitches must be “spoken and disclosed in a volume, cadence and syntax sufficient for an ordinary customer to hear and comprehend.”

Under the compliance plan, the Capital One is required to develop sales scripts that “clearly and prominently” explain and assess a cardmember's eligibility, accurately detail the agreement they have entered into, and outline cancellation options. Within three business days after a purchase, Capital One must mail a complete and accurate disclosure detailing terms, conditions and billing information.

Capital One will pay settlements to consumers who either initially enrolled in a product on or after August 1, 2010. Customers will receive a refund of the associated finance charges, any over-the-limit fees resulting from the charge for the product, and interest.

For “payment protection” customers who were misled and had claims denied because a hardship occurred prior to enrollment, Capital One will pay their claims as if they had been eligible.

Compliance with the terms of the agreement will be assured through the work of an independent auditor, the CFPB said.

In addition, the OCC is issuing its own order against Capital One that includes a $35 million penalty.

The full text of the CFPB's Consent Order is available online, as is a fact sheet.