NEW YORK ( LowCards.com) -- The Consumer Financial Protection Bureau is punishing credit card issuers that misled cardholders into buying payment protection and credit monitoring services. Last week the bureau announced that Discover (DFS - Get Report) will pay $214 million in fines and penalties. In July, Capital One (COF - Get Report) agreed to pay $210 million for the same thing.
Banks push these services aggressively because they generate significant revenue. The bureau is doing what it can to protect consumers, but consumers must also protect themselves. Signing up for services you don't need or understand wastes money you can be using to pay down your balance and get out of debt.
What are these services, and do cardholders need them?
Credit protection plans can provide some insurance for life events such as unemployment or disability that may prevent you from making your loan payment. Debt protection products suspend or cancel all or part of a consumer's obligation to repay the outstanding balance on your credit card when a qualifying event occurs. These protection plans actually protect the lender from your inability to repay by making payments to the lender on your behalf.