Bank Stocks Face Another Problem: a Regulator that Actually Regulates – the Horrors!
If there’s one truism in the financial markets, it’s that regulators exist to be co-opted. Call it the golden rule: the one who has the gold makes the rules. So banks must be pretty peeved that the new Consumer Financial Protection Bureau has decided to take its job seriously, at least for now.
In its major first action, it the CFPB is going after Capital One (COF) for pushing consumers into expensive add-on products they didn’t use or want, reports the New York Times. In particular the CFPB (working with the Office of the Comptroller of the Currency) is making Capital One return $150 million to customers for pushing something long called credit insurance, essentially an insurance policy that forgives or trims debts of card holders if they, say, lose their jobs. The bank’s call centers sold this to ineligible unemployed customers and tricked people into signing up, larding costs onto already expensive loans.
The action is bad news for banks like Citigroup (C), JPMorgan (JPM), HSBC (HBC) and Bank of America (BAC), even if they haven't been peddling credit insurance, because it shows the new agency will be enforcing credit laws aggressively.
But it’s good news for consumers who’ve been getting ripped off for years. It’s also good news for writers, who we hope will take this opportunity to make millions of jokes using Capital One’s taglines and spokespeople (Alec Baldwin, and short, scrubby vikings). “What’s in your wallet?” “A really crappy credit card!” You know, something like that.
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