Politics aside, those of us who advocate Extreme Trust and customer centricity should give three cheers for the Consumer Financial Protection Bureau. Finally there's a way to punish companies that treat customers with complete disregard and disrespect. This week it was announced that the CFPB levied a $210 million fine on financial services firm Capital One for deceiving customers about credit card products and fees. The company was solely interested in making a quick buck, and got called out for it.
According to the Wall Street Journal, Capital One "allowed its call-center contractors to pressure customers into buying consumer-credit-protection products such as identity-theft-monitoring services." The Journal goes on to report that this is not an isolated incident -- Capital One has a history of extreme distrust:
"The company was the biggest source of credit-card complaints to the CFPB, according to data the agency made available last month. Capital One was the subject of 33 complaints, accounting for 24% of the 137 complaints the bureau has received since June 1."
In these transparent times, such blatant disregard for customers will not go unnoticed. Capital One's popular "What's in your wallet" commercials won't be able to save it from the wrath of customer dissatisfaction, complaints, and now fines. I expect some customers will jump ship as the news spreads about how it treats existing customers. And investors take note -- its short-term focus has a real financial impact on the company, as well. The Journal reports that its "second-quarter earnings dropped 90 percent from a year earlier to $93 million, thanks to items including costs tied to the settlement." A quick revenue bump today isn't worth it in the long run.
Frankly I'm surprised that Capital One thought it could get away with its deceptive practices. In this day and age, consumers can fight back both in the court of public opinion and now with stronger legal and regulatory action.
Capital One clearly has a dysfunctional culture. So many of its practices were designed to con the customer, not develop strong relationships and mutual respect. The company better make some changes to its people, processes, and how it does business if it wants to survive in the hyper-competitive financial services industry. I recommend reading Extreme Trust: Honesty as a Competitive Advantage, by Don Peppers and Martha Rogers, Ph.D. as a way to get started (sorry, I couldn't resist the easy opportunity for a plug here).
Capital One is the first, but certainly not the last company to get fined. The CFPB is just getting started. "We are putting companies on notice that these deceptive practices are against the law and will not be tolerated," said Richard Cordray, CFPB director, in a press conference. It's sad that the state of the market requires government and regulatory intervention. It's such common sense that acting in the best interests' of customers is good business. Unfortunately too many companies have their eyes on the quick buck. The good news is that the CFPB and consumers are on alert, and extreme distrust will no longer be tolerated as a way of doing business. Three cheers for the good guys.