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TheStreet Open House

Trading Off Regulatory Misfortune: Street Whispers

NEW YORK ( TheStreet) -- The Consumer Financial Protection Bureau has set quite a precedent with its first enforcement action against Capital One (COF - Get Report), and investors could see an opportunity if and when the regulator takes action against another credit card lender.

The CFPB is celebrating its one-year anniversary as a unique agency within the Federal Reserve, that actually sets its own budget. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act -- signed into law by President Obama in July 2010 -- the CFPB is charged to "help consumer financial markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives."

The CFPB's first regulator enforcement action on July 18 showed that the Bureau meant business, when it ordered Capital One to refund $140 million to two million credit card customers and pay an additional fine of $25 million for failing to properly monitor third party vendors' sales of additional services to customers, including "credit protection" and "Credit monitoring" services.

Capital One said it was setting aside $150 million for the refunds, and its main subsidiary Capital One Bank (USA), NA, agreed to an additional $35 million penalty from the Office of the Comptroller of the Currency, making for a total tab of $210 million.





"It is a huge amount of money," says Linda Goldstein -- a partner with Manatt, Phelps and Phillips, chairing the firm's Advertising, Marketing & Media division -- who also adds that the CFPB's agreement with Capita One suggests "on its face that the Bureau was not willing to engage in much negotiation on consumer redress."

Goldstein adds "we're going to see more of this for sure," and that "any financial institution marketing these services wants to take a hard look at complaint rates charge-back rates, the marketing materials and putting an affirmative monitoring program in place."

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