Bank of America announced that it would drop its controversial product!

Bank of America announced that it would drop its controversial product intended to backstop consumers when they cannot make a payment on their credit card. The product, known as debt-cancellation, is a type of insurance whereby customers accept a small monthly charge to have their debts reduced, forgiven, or requirement to pay suspended in the event of a job loss or disability.
Debt cancellation programs have drawn criticism from consumer protection agencies due to the high cost of the plan. Many credit card companies offer similar protection at a price equal to 1% of the cardholder’s daily balance.

Bank of America has agreed to stop selling the product and provide six months of free protection to anyone currently enrolled. The program would then be ended promptly in 2013, and no further policies would be sold to consumers during that time.

Allegations from cardholders suggest that the terms of the program aren’t as clear as they seem. In many cases, cardholders are offered a free trial of the service before automated fees are added to their accounts after the promotional period. Some credit card companies even offer a rewards system for those who enroll – benefits often include free gift certificates, travel options, and other lures to get customers to sign up into the program.

Bank of America likely won’t face additional scrutiny from regulators. The company maintains that it will suspend the program as part of a change in its own policies so as to streamline operations and reduce the number of “noncore” businesses that it operates. In 2009, the government suggests that customers paid credit card companies as much as $2.4 billion for the service. In 2012, Bank of America settled in a modest $20 million suit on its sales practices, which were deemed to be based on false marketing and advertising.

Source:
creditcardflyers.com