MBNA America Bank and the entities that absorbed it — Bank of America and FIA Card Services — have been sued and penalized repeatedly over how they marketed credit cards, charged interest and fees, and pursued customers through arbitration. The largest MBNA lawsuit outcome was a 2014 Consumer Financial Protection Bureau action requiring an estimated $727 million in consumer relief for illegal add-on product practices reaching back to 2000.1Consumer Financial Protection Bureau. CFPB Orders Bank of America to Pay $727 Million in Consumer Relief for Illegal Credit Card Practices Other settlements addressed deceptive low-rate ads, retroactive penalty interest, Canadian cash advance fees, and arbitration awards that courts refused to enforce. The U.S. class settlements described below are closed to new claims.
The $727 Million CFPB Add-On Products Action
In April 2014, the CFPB ordered Bank of America and FIA Card Services to provide roughly $727 million in relief to consumers harmed by illegal credit card add-on practices dating to 2000, a period that covers the MBNA years. The bank also paid $20 million in civil penalties to the CFPB and $25 million to the Office of the Comptroller of the Currency.2The New York Times DealBook. $800 Million Penalty for Bank of America Credit Card Practices
Two sets of practices were at issue. Between 2010 and 2012, telemarketers used misleading scripts and off-script pitches to sell “Credit Protection Plus” and “Credit Protection Deluxe,” falsely implying the first 30 days were free, misrepresenting enrollment calls as information-gathering, and exaggerating benefits. About 1.4 million consumers were affected, and roughly $268 million in relief went to this group.1Consumer Financial Protection Bureau. CFPB Orders Bank of America to Pay $727 Million in Consumer Relief for Illegal Credit Card Practices
The larger category involved identity protection billing between 2000 and 2011. The bank charged approximately 1.9 million accounts for “Privacy Guard,” “Privacy Source,” and “Privacy Assist” credit monitoring services before it had the legal authorization to access customers’ credit information. Customers paid for services they never received, and some charges pushed accounts over their credit limits and triggered further fees. About $459 million in relief addressed this category.1Consumer Financial Protection Bureau. CFPB Orders Bank of America to Pay $727 Million in Consumer Relief for Illegal Credit Card Practices
Existing customers received credits to their active accounts; former customers were mailed checks or given reductions on charged-off balances. The enforcement action has been terminated.3Consumer Financial Protection Bureau. Bank of America, N.A. and FIA Card Services, N.A. Enforcement Action
Retroactive Penalty Rate Settlement
Two related class actions, Frederick v. FIA Card Services, N.A. and Augustine v. FIA Card Services, N.A., went after a practice used at FIA, Bank of America, and MBNA. When an account went delinquent or into default, the banks did not just apply the penalty interest rate going forward. They calculated it retroactively to the start of the billing cycle in which the missed payment or default occurred, applying the higher rate to transactions that predated the trigger.4Top Class Actions. FIA Bank of America MBNA Credit Card Settlement
The cases resolved with a $10 million settlement fund covering cardholders between July 27, 2002, and October 18, 2010, who were assessed and paid a higher rate calculated from the beginning of the billing cycle. Active accountholders received automatic credits or checks; former customers had to file a claim by May 2, 2011. The settlement is now closed.5Top Class Actions. MBNA Bank of America FIA Card Services Credit Card Class Action Lawsuit Settlement
The Low-Rate Advertising Settlement (Spark v. MBNA)
In 1996, Florida attorney Andrew Spark filed a class action in federal court in Wilmington, Delaware, alleging that MBNA’s ads promoted low introductory rates for balance transfers without disclosing that new purchases on the same cards would not receive the advertised rate. A customer who signed up expecting 6.9% would find that only transferred balances qualified, while everyday purchases carried a higher rate.6Los Angeles Times. Credit Card Company Settles Over Ads
MBNA agreed to settle for up to $7.8 million, with $6.5 million for consumer reimbursement and about $1.28 million for attorney fees.7The New York Times. Credit Card Company Settles Over Ads U.S. District Judge Roderick McKelvie called the settlement “fair and reasonable” in September 2000, with final approval in May 2001. The class of roughly 1.84 million included active cardholders, who received an automatic $3.57 credit, and former customers, who had to submit a form for the same amount. Over 1.27 million class members ultimately received payments or credits totaling about $4.54 million.8U.S. District Court for the District of Delaware. Spark v. MBNA Corp., Civil Action No. 96-497-RRM
Canadian Cash Advance Fee Settlement
In Canada, Markson v. MBNA Canada Bank alleged that the flat fees MBNA charged on cash advances functioned as interest exceeding the 60% annual limit under Section 347 of the Criminal Code.9Koskie Minsky LLP. MBNA Canada Bank After the Ontario Superior Court and Divisional Court refused to certify the class, the Court of Appeal for Ontario reversed and certified the case on August 15, 2007, and the Supreme Court of Canada declined MBNA’s appeal that November.10Stikeman Elliott LLP. Ontario Court of Appeal Overturns Lower Courts, Certifies Criminal Interest Cash Advance Class Action
BofA Canada Bank, the successor, agreed to an $8 million settlement fund. The court approved the deal on October 12, 2012, and distribution to active cardholders began on March 28, 2013. The class was expanded under the settlement to cover anyone who held an MBNA or Cuets Financial credit card with cash advance capabilities up to November 30, 2011. Of the $8 million, $2.4 million went to legal fees, 10% of the remaining balance went to a Class Proceedings Fund, $500,000 went to the Law Foundation of Ontario, and the rest went to eligible cardholders as credits. The bank admitted no wrongdoing.11Koskie Minsky LLP. Markson v. MBNA Canada Bank Settlement Notice
Arbitration Awards Courts Refused to Enforce
MBNA routinely included mandatory arbitration clauses in its cardholder agreements. When customers defaulted, the bank would obtain arbitration awards through the National Arbitration Forum and try to confirm them in court. Courts in multiple states refused, finding MBNA had failed to prove the arbitration agreements even existed or that customers had received proper notice.
The leading example is MBNA America Bank, N.A. v. Credit, decided by the Kansas Supreme Court on April 28, 2006. MBNA had won a $21,094.74 arbitration award against Loretta K. Credit. When it moved to confirm the award, she challenged whether she had ever agreed to arbitrate. The Kansas Supreme Court affirmed the lower court’s decision to vacate, finding that MBNA never produced a copy of the arbitration agreement, failed to properly serve the award as Kansas law required, and did not file a legally sufficient response to Credit’s motion to vacate.12Kansas Courts. MBNA America Bank v. Credit, No. 94,380 Without evidence of a valid agreement, the court held, the arbitrator lacked jurisdiction and the award was “null and void.”13FindLaw. MBNA America Bank, N.A. v. Credit
The Kansas court described this as a “national trend,” citing similar rulings from Connecticut, Indiana, North Dakota, Ohio, and Texas.13FindLaw. MBNA America Bank, N.A. v. Credit In New York, a civil court denied confirmation in MBNA Am. Bank, N.A. v. Straub (2006) on the same grounds: no written agreement produced, no proof the consumer was bound by one, no proper service of the arbitration hearing notice.14NY Courts. MBNA Am. Bank, N.A. v. Straub For consumers who were sued to confirm such an award, these rulings established that the bank had to actually produce the agreement and show proper notice — something it often could not do.
Are Any of These Settlements Still Open?
No. The Spark advertising settlement closed in the early 2000s, the retroactive rate hike settlement required claims by May 2, 2011, the Canadian Markson distribution began in 2013, and the CFPB add-on enforcement action has been terminated. If you paid MBNA, Bank of America, or FIA Card Services for a credit protection or privacy product, or were charged a retroactive penalty rate, any relief would have been issued during those settlement windows as an account credit, a mailed check, or a reduction to a charged-off balance.
Who Owns the Legacy Now
Bank of America acquired MBNA in a deal worth roughly $34.2 billion that closed on January 1, 2006, absorbing both the credit card portfolio and the legal liabilities.15CBS News. Bank of America Acquires MBNA MBNA became Bank of America’s card services unit, and its credit card operations were eventually folded into FIA Card Services, N.A. That is why the retroactive rate hike settlement, the $727 million CFPB action, and the Canadian cash advance case were brought against FIA Card Services or BofA Canada Bank rather than MBNA itself. If your original account was with MBNA, the successor entity responsible for any historical claim is Bank of America or FIA Card Services.