The federal agency tasked with helping to protect consumers from misleading or confusing lending practices is now looking into a service credit card issuers provide ostensibly to help avoid fraudulent credit card debt.
The new federal Consumer Financial Protection Bureau, with the help of the Federal Deposit Insurance Corporation, is looking into a plan offered by Discover Financial Services that says it will protect consumers in the event of misuse of their credit card account, according to a report from American Banker. Lenders have expressed concerns that heavier regulation of these plans will only lead to more debt relief issues for cardholders enrolled in them, but recent studies have highlighted that card issuers only return about 21 cents from every dollar paid into these premiums, and institutions turn about $1.3 billion in profit on them annually.
If the financial institutions offering these plans were to categorize them as insurance, that payout ratio would be illegal, and as a consequence, there is concern in the lending industry that the investigation could become broader, the report said.
Fraud can seriously impede consumers' ability to reduce debt, and carefully checking their monthly statements can help spot bogus charges.