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FDIC Consumer News

Fall 2015

"Add-ons" Sold With Credit: Do Your Research Before You Buy

Lenders who approve consumers for a loan or credit card often cross-sell related products or services to them. Examples typically offered include "protection plans" that can help the borrower with loan payments in the event of a hardship like a disability or a job loss; credit life insurance to pay off a loan in the event of the borrower's death; identity theft protection that will monitor credit reports for signs of fraud; and credit monitoring services that will alert the consumer to significant changes in credit reports and scores as a result of new information. FDIC Consumer News wants you to know that while "add–on" products may benefit some consumers, there may be significant costs or limitations.

In addition, there have been cases in which credit card issuers have enrolled customers in services without their consent or billed for services not provided as promised. The FDIC and other regulators have cited and penalized some lenders for unfair and/or deceptive practices, such as charging customers for add-on products that they did not sign up for or receive. In two recent examples involving FDIC settlements with banks, one institution agreed to pay approximately $61.5 million in restitution to harmed consumers (see the press release), and another approved a restitution amount of approximately $15 million (see the press release).

"Before purchasing an extra product, it is important to review the terms, costs and benefits in writing to ensure that it meets your needs," suggested Elizabeth Ortiz, FDIC Deputy Director for Consumer and Community Affairs. "Moreover, these products are always optional, so you should be suspicious of any high-pressured sales tactics or trial periods that may be difficult to cancel."