Want to know who’s on the fail list when it comes to customer service?
Based on actions taken by the Consumer Financial Protection Bureau (CFPB) against bad financial practices, Yahoo Finance put together a list of the year’s worst offenders when it came to having customers’ best interest at heart.
To give you an idea of the consequences for ‘bad practices,’ in just the last year, the CFPB recovered more than $200 million in penalties from companies that ‘violated financial protection laws.’ And nearly 900,000 consumers reaped the benefits of those penalties.
2015’s top customer fails
For-profit college chain Corinthian Colleges Inc.
A chain of now-defunct colleges — under the main banner of Corinthian Colleges and also operating under the names Everest Institute, WyoTech and Heald College –was found to be misleading students and falsifying job rates after graduation in order to boost attendance.
Meanwhile, more than 60% of these schools’ borrowers defaulted on their student loans within three years — which is six times the rate for federal student loan borrowers. Plus, interest rates on these student loans were double the rates of federal student loans.
Read more: New way’s to pay down your student loan debt
According to the CFPB, Corinthian schools were found to have targeted ‘isolated, impatient people with low self-esteem and few people in their lives who care about them, and who are stuck and unable to see and plan well for their future.’
Subsequently, back in February, the CFPB and Department of Education announced that the chain of colleges would forgive $480 million of private student loans to former students of the schools.
Then in October, a federal court ruled that Corinthian was liable for more than $530 million in loans taken out by students due to its predatory lending practices.
Verizon and Sprint
In May of 2015, the CFPB discovered that Verizon and Sprint had billed customers for millions of dollars of unauthorized charges between 2003 and 2014. These charges ranged from one-time fees of $.99 to $14.99, to recurring charges of $9.99 for premium service packages such as horoscopes or sports score updates that customers did not order. Verizon and Sprint were earning 30%-40% of the revenue from these charges while ignoring customer complaints.
Unfortunately, Verizon and Sprint aren’t the first mobile carriers to have profited from this practice, known as ‘cramming’ — AT&T and T-Mobile have faced similar lawsuits in the past and had to pay hefty settlements.
Financial services offenders
Hudson City Savings Bank
The Hudson City Savings Bank, located in New Jersey, was found to be ‘redlining’ its clients as of September 2015 — and paid a $33 million settlement for doing so — the largest redlining settlement in history.
Redlining is a practice by which businesses go out of their way to discriminate against people of certain racial and ethnic backgrounds — intentionally declining loans or raising interest rates based on a borrower’s ethnicity. The Consumer Financial Protection Bureau along with the Department of Justice, found that only 25 of the 1,886 mortgages approved went to black homeowners in 2014.
The $33 million settlement included $25 million in direct loan subsidies to qualified borrowers in the affected communities, $2.25 million in community programs and outreach, and a $5.5 million penalty.
Provident Funding Associates, a California mortgage broker, was indicted for a similar claim last May, paying $9 million in damages.
Read more: Why investing with a bank is a big ripoff
Hundreds of thousands of RushCard customers were locked out of their debit card accounts in October, due to an unsuccessful systems upgrade. This lockdown of customer accounts lasted from a few days to several weeks.
For a lower-income user base with little to no savings, the effect was devastating.
The CFPB has yet to file a formal complaint against RushCard, but the company’s CEO Russell Simmons has publicly apologized for the incident. In consideration of damages, the company has offered to waive debit card fees through February of 2016, and it says all outstanding customer complaints have been resolved. However, the CFPB revealed in early December that RushCard ‘has been unable to deliver on its pledges of cooperation’ — saying the company avoided requests for information and documents regarding the glitch.
In July of last year, the CFPB ordered Discover Bank to pay $16 million to student loan borrowers for overestimating minimum payment information and withholding key instruction on signing up for federal income tax benefits. Borrowers were subsequently stuck with paying interest on loans that should have been deferred, and some borrowers who weren’t able to afford payments became delinquent on their accounts. Thankfully, the refunds, ranging from $92 to $500 were credited back to borrowers’ accounts.
JPMorgan Chase is in serious trouble with the CFPB for selling bad debts to buyers — in 47 states. JPMorgan sold debts that had been settled already, debts that had been proven to be fraudulent, debts that had incorrect balances, and even sold debts owned by deceased buyers!
Though it was third-party collectors who went after borrowers for the bad debts, JPMorgan was called into account because it had sold the debt in the first place — knowing it was bad debt. As a result JPM was ordered to pay $200 million, $50 million of which was designated for customer refunds.
In May of 2015, PayPal was found to have illegally signed people up for unwanted credit. Customers who thought they were signing up for PayPal’s regular payment processing service discovered they had accrued credit balances and began receiving debt collection notices for past due amounts they knew nothing about.
After the CFPB discovered this shady practice, PayPal was ordered to refund customers $15 million and also pay a $10 million fine.
If you’re a business owner, all of these should be examples of what not to do. But in order to keep customer happy, it’s best to employ the golden rule: Do unto others what you would want them to do to you!