This article by Victoria Holstein-Childress discusses the CFPB’s first enforcement action, announced July 18, 2012, which together with a parallel OCC enforcement action required a major bank to pay $210 million to settle charges that its call center vendors used deceptive marketing tactics to pressure customers to pay for add-on products to the bank’s credit cards. The action is notable because it makes clear the CFPB intends to hold financial institutions fully liable for the actions of their third party vendors. Further, the CFPB warned that other card issuers who market similar products may soon face similar enforcement actions and are the subject of ongoing investigations.

Concurrent with the announcement of this enforcement action, the CFPB also issued a Compliance Bulletin, which “puts other institutions on notice that the CFPB will not tolerate deceptive marketing practices, and institutions will be held responsible for the actions of their third party vendors.” While focused on credit card add-on products, the bulletin is also intended to serve as guidance for the marketing of similar products offered in connection with other forms of credit or deposit services.

Although it remains to be seen whether this enforcement action is representative of the approach the CFPB will take in future enforcement actions, notably, the Bureau used its first enforcement action to provide industry-wide guidance regarding its expectations as to the conduct that was the subject of the action. This guidance approach, if it becomes part of the CFPB’s enforcement practice, may provide valuable insights to covered institutions regarding what the CFPB views as unfair, deceptive, or abusive practices, but also may become a form of rule-making that circumvents the administrative procedures and safeguards that otherwise would apply.