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Santander fined $6m for add-on charges
Federal regulators fined Santander Bank $6 million for billing customers for an identity-protection service that many did not receive, making it the latest bank penalized for marketing and selling questionable add-on products.
Santander, which is owned by Spanish financial services giant Banco Santander SA and has its US headquarters in Boston, unfairly charged customers for identity protection between January 2010 through August of last year, according to the Office of the Comptroller of the Currency, which regulates banks. The bank, formerly known as Sovereign, pitched the Sovereign IdentityProtector, which cost up to $14.99 a month, as a service that provided customers with credit monitoring and gave them access to their credit reports.
But customers were billed, sometimes multiple times, even though their credit was not getting monitored, regulators said. Santander used a third-party vendor for the identity protection service, retaining a portion of the fees paid by customers.
This was part of a pattern of misconduct that resulted in financial gain to the bank, the regulator said in a consent order released last week.
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Santander officials said the bank discontinued the Sovereign IdentityProtector in July 2013. Regulators said Santander continued to bill customers for more than a year after that.
Santander has spent $37.6 million refunding customers who paid for but may not have received the services. The bank also ended its relationship with the vendor, AMT Consumer Services, which was bought by New York-based AmTrust Financial Services Inc. in 2013.
AmTrust officials said the bank was responsible for billing customers for the identity protection. Sovereign Bank had the ultimate say over the design, specifications and features of the Sovereign IdentityProtector product, said Beth Malone, the spokeswoman for AmTrust.
Federal regulators have slapped several banks with fines recently over their sale of identity protection services. Last fall, US Bank paid a $9 million penalty to both the Comptroller of the Currency and the Consumer Financial Protection Bureau for charging consumers for identity protection and credit monitoring services that were not provided. A year ago, Bank of America paid a $20 million fine for deceptively marketing add-on products and illegally charging its customers for its identity protection products.
Most banks used outside vendors to provide the services.
Add-on products are extremely profitable for banks but don t necessarily benefit consumers, said Ed Mierzwinski, the consumer program director in Washington for the Massachusetts Public Interest Research Group, a nonprofit consumer advocacy group. Regulators are very concerned that banks are getting in bed with companies that do a sloppy job.
In some cases, consumers thought they were receiving a free service from their bank or that they were simply agreeing to a short-term trial offer and then were billed from $9.99 to $29.99 a month for the service which they didn t get, Mierzwinski said.
If consumers are fearful of thieves opening accounts in their name, placing a security freeze on their credit is a cheaper and more effective option than these credit monitoring services, Mierzwinski said. A credit freeze prevents anybody from accessing a consumer s credit files, so if a thief uses a stolen Social Security number and tries to open a new account under that identity, he would be blocked.
However, consumers do have to pay a small fee and take the extra step of temporarily lifting the freeze when they apply for a car loan, mortgage, or credit card.