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Credit card company deceptive marketing creates overwhelming debt

Some credit card lenders have been long accused of being deceptive in their marketing practices. It is such deceptive practices which can help to create overwhelming debt for certain consumers in Texas and elsewhere during the recent economic downturn. One of the latest credit card products which have recently been the target of scrutiny is add-on products.

The Consumer Financial Protection Bureau (CFPB) is currently reviewing the add-on products from credit card lenders in order to see if any abuse has been occurring. This has caused many major credit card companies to slow down efforts to sell the add-on products, some of which assist consumers to pay credit card bills in the case of sickness or a sudden loss of employment. The products may also offer credit monitoring to consumers.

Card add-on products can be quite profitable for lenders. For example, Discover earned $428.2 million on such products in 2011, which was 3.8 percent higher than in 2010. The CFPB claimed that Capital One and Discover deceived consumers while soliciting customers over the phone and then signing them up for the add-on products without properly informing them. Some of the deceptive sales activities were allegedly performed by call centers run by third-party companies which the credit card companies had contracted.

The CFPB's efforts to stop these deceptive practices may help consumers avoid overwhelming debt in the future. However, it may already be too late for some consumers in Texas who have already fallen for the add-on product scams. The fees levied for these products can quickly add up, causing consumers to default on their monthly payments. For some in this situation, the best option could be to file bankruptcy in order to gain relief from debt.

Source: Bloomberg Businessweek, "U.S. Credit-Card Lenders Shun Add-Ons as CFPB Cracks Down," Carter Dougherty, Oct. 2, 2012

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