Credit Card Add-on Products in the United States

Marketing

Credit card issuers market various “add-on” products to card users, including debt protection, identity theft protection, credit score tracking, and other products that are supplementary to the credit provided by the card itself.

Dodd-Frank Act

Under the Dodd-Frank Act, it is unlawful for any provider of consumer financial products or services or a service provider to engage in any deceptive act or practice (2 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

It is also unlawful for “any person to knowingly or recklessly provide substantial assistance to a covered person or service provider” in violation of the prohibitions against deceptive practices (12 U.S.C. § 5536(a)(3).

As a general matter, a representation, omission, act, or practice is deceptive if:

• The representation, omission, act, or practice misleads or is likely to mislead the consumer;
• The consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and
• The misleading representation, omission, act, or practice is material.

Truth in Lending Act (“TILA”)

Regulation Z implements the Truth in Lending Act. With respect to open end credit, Regulation Z contains rules on account-opening disclosures and periodic statements, and also sets forth special rules that apply to credit card transactions, treatment of payments and credit balances, procedures for resolving credit billing errors, annual percentage rate calculations, and advertising (See 12 C.F.R. §§ 1026.5 through 1026.16; see also 12 C.F.R. § 1026.4(d)).

Regulation Z also includes rules that apply to credit and charge card application and solicitation disclosures ( See 12 C.F.R. §§ 1026.51-1026.60). Institutions must comply with all requirements of Regulation Z, including when disclosing any fees or charges for debt cancellation and debt suspension plans (See, e.g., 12 C.F.R. §§ 1026.6(b) and 1026.60(b)).

Equal Credit Opportunity Act (“ECOA”)

Under the Equal Credit Opportunity Act and its implementing regulation, Regulation B, creditors may not discriminate against an applicant in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract). The Equal Credit Opportunity Act and Regulation B also provide that a creditor may not discriminate based on the fact that all or part of an applicant’s income derives
from a public assistance program, or the fact that an applicant has in good faith exercised any right under the Consumer Credit Protection Act (See 12 C.F.R. § 1002.4).

The Equal Credit Opportunity Act and Regulation B apply to credit-card applicants. As such, fair lending concerns may arise based on differential treatment on a prohibited basis in connection with add-on products—including, for example, requiring applicants based on their race or age to purchase credit card add-on products as a condition of obtaining credit.