Bank of America Corp will stop selling credit protection services which were the subject of a class action suit in which customers alleged they were charged without their permission and enrolled through deceptive practices.
A $20 million settlement of the lawsuit received preliminary court approval last month but still needs final approval.
A bank spokeswoman on Tuesday confirmed Bank of
America's decision to end the services. The bank denied any wrongdoing in the settlement.
For a monthly fee, the services canceled customers' minimum monthly credit card payments if they lost a job, were hospitalized or faced other significant life events.
The lawsuit also alleged that customers didn't get their money's worth.
Others lenders have also faced scrutiny for these products. Capital One Financial Corp last month reached a $210 million settlement with regulators over its sale of certain payment protection and credit monitoring products.
Bank of America made an "independent business decision" to end the services, according to court documents outlining the settlement in federal court. The move was part of a broader strategy to streamline the company's businesses, bank spokeswoman Betty Riess said.
The bank stopped offering the services to new customers this month and expects to exit the business entirely next year, Riess said. Current customers will receive the services for free for six months before cancellation, she said. Third-party vendors provided the services, she said.
If the settlement is approved, affected customers will likely receive $50 or $100, depending on their circumstances, according to court documents. The bank's "Credit Protection Plus" service cost 85 cents per $100 of a customer's monthly balance up to $25,000, according to the bank's web site.
The program could cancel up to two times a customer's minimum monthly credit card payment for up to 18 months for a job loss or hospitalization. For events such as marriages or divorces, it could cancel a customer's minimum monthly payment for three months.
JPMorgan Chase & Co stopped offering new enrollments in its payment protection program in October, bank spokesman Paul Hartwick said. The bank continues to serve current customers.
Citigroup recently paused telephone sales for its debt protection products, allowing it to complete reviews that are under way, bank spokesman Sean Kevelighan said. The bank is still making sales online and through the mail.
Bank of America late last year also stopped offering identity theft protection services to credit card customers, Riess said. In its most recent quarterly securities filing, the bank said it was in discussions with regulatory authorities regarding identity theft protection services.
(Reporting By Rick Rothacker in Charlotte, North Carolina; Editing by Kenneth Barry)