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April 4, 2014

Bank of America in Settlement Talks Over Credit-Card Practices

Bank of America Corp. BAC -0.23% is in discussions to pay more than $800 million to settle allegations it pushed customers into signing up for extra credit-card products, according to people familiar with the talks.”

“The agreement with the Consumer Financial Protection Bureau, which could be announced in coming days, would mark the largest federal settlement with a credit-card provider over so-called add-on products. It would be the agency’s fifth such agreement with a credit-card provider over products such as identity-theft protection and debt cancellation in the event of a job loss.”

“A significant chunk of the money is expected to go back to customers.”

“A CFPB spokeswoman and a Bank of America spokesman both declined to comment.”

“The settlement would be the latest in a string of agreements Bank of America has reached to resolve regulatory probes into past practices. Last week, the Charlotte, N.C.,lender agreed to pay $9.5 billion to settle mortgage claims with Fannie Mae,FNMA -3.13% Freddie Mac FMCC -3.12% and their federal regulator, and another $15 million to the state of New York to end a civil lawsuit by New York state Attorney General Eric Schneiderman related to the bank’s purchase of Merrill Lynch & Co. during the financial crisis. The bank neither admitted nor denied wrongdoing in both settlements. In early 2013, the bank agreed to pay $11.6 billion to end a long-running dispute with Fannie Mae.”

“The CFPB, along with other agencies, has been cracking down on credit-card companies for misleading consumers about the value of add-on products. Credit-card companies marketed these products aggressively to consumers, saying they would protect the cardholders from identity theft or cancel debt in the event of a job loss. Federal officials say the products provide little financial benefit to consumers and were often marketed in a deceptive manner.”

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Read full Wall Street Journal article here.

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