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CFPB, issuers and third parties

By Janna Herron ·
Tuesday, September 25, 2012
Posted: 4 pm ET

One small fact that slipped by me Monday in the dash to write about the Consumer Financial Protection Bureau's smackdown on Discover is the key role that outside sales companies can play in marketing credit card add-on products.

Those sales companies buy cardholder information from Discover and other issuers. Often, they're the voice at the other end of the line hawking payment protection or credit monitoring services.

"This can be problematic because these "sales" companies are compensated on sales' success, which makes them very aggressive," explains John Ulzheimer, president of consumer education at

Discover spokesman Jon Drummond told me that the deceptive marketing that the CFPB condemned involved both in-house and outside parties. And when the CFPB came down on Capital One in July for similar violations, the company fingered its third-party vendors for not adhering to its sales scripts and policies.

This isn't an excuse for either company, which should work with companies that play by the rules. (And to be fair, the president of Cap One's card business said the company was "accountable" for the vendors' actions.)

"Discover has a pretty good reputation, (but) you're only as good as the company with whom you align to push these services," Ulzheimer says. "It's guilt by association to some extent."

It also reminds me of debt collection agencies that are contracted by credit card companies to retrieve outstanding balances. Some issuers and their debt collection firms are under scrutiny for suing consumers for credit card debt without proper documentation. (A similar trend popped up a few years ago in the mortgage market when foreclosure law firms were kicking people out of houses without accurate documentation.)

Debt collection agencies are also considered "third-party" companies by the industry. Will credit card issuers be on the hook for any of their violations as well? Probably, given the CFPB's actions this year against Discover and Capital One. The agency is expected to start overseeing the debt collection industry sometime this fall. More smackdowns may come.

Follow me on Twitter: @JannaHerron

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