By Michael Finch, Roosevelt Summer Academy Fellow at NCL Michael Finch, a Roosevelt Summer Academy fellow at NCL this summer, is a rising senior at Middle Tennessee State University, where he is majoring in Political Science with a concentration in Public Administration and a minor in History. At MTSU, Michael is the Assistant Editor for the student newspaper, Sidelines, and is in the process of co-founding a chapter of the fraternity Sigma Phi Beta. Mary (not her real name) had a Capital One credit card, and was making timely payments, often above the required minimum. Her balance varied between about $700 and $800, and she was slowly chipping away at it. One month though, she received her statement and saw that her balance had somehow risen to $1000. Without realizing it, she'd been signed up for the Capital One Payment Protection Plan, which is for cardholders who worry they may become unemployed or disabled in the future and won't be able to make payments. If they activate Payment Protection, it pays their minimum balance for a predetermined period of time. The unwanted charges for the plan, along with charges for other services such as CreditInform, had driven Mary over the limit, causing even more fees and explaining her skyrocketing balance. This, unfortunately, is a common situation among cardholders. How does this happen? Capital One's payment protection plan, like many others, costs the cardholder 99 cents for every $100 of balance at the end of the payment period. This means that, over the course of a year, Mary ended up paying Capital One almost $120 in extra fees just for this one service (which she hadn’t knowingly agreed to). Many consumers, like Mary, are auto-enrolled in payment protection and other services when they open a credit card, or aren't informed that these services are optional. After Mary realized she'd been signed up for a plan she wasn't informed about, she found it difficult to get it canceled. She was told the plan was handled through a third-party company, which proved difficult to get in touch with. Consumers who were misled or pressured into signing up often have an even harder time getting the plan canceled, because even though unfair practices were used to get them to enroll, credit card companies argue that they were, in fact, informed. What can be been done? In January of 2010, a class action lawsuit was filed against Capital One, arguing that the restrictions of its payment protection plan weren't sufficiently explained before cardholders were enrolled, and that if consumers did choose to activate it, the benefits were too difficult to actually receive. Capital One agreed on a settlement, but the payouts ranged from a meager $15 to $63 per consumer. For cardholders who paid hundreds of dollars in fees they didn't consent to, or who tried to activate payment protection benefits and were denied on a technicality, these amounts obviously aren't enough. Despite lawsuits being filed against Capital One and other credit card companies for the unfair practices that victimized Mary and many like her, they continue. What needs to change? One pressing issue is the lack of regulation. Payment protection plans are incredibly similar to "credit insurance" plans. The main difference is that credit insurance plans have far more regulations in place to protect consumers. Insurance companies are required to pay out 40 percent to 70 percent of the premiums they take in. Because credit card companies disguise their credit insurance as “payment protection plans,” they aren’t obligated under this regulation. According to a July 2003 study by the Center for Economic Justice, payment protection plans only paid out about 5 percent of the premiums they collected. Despite this relatively low payout, payment protection plans are 25 percent more expensive, on average, than credit insurance. Consumers must be educated about the risks of these payment protection plans, but the responsibility isn't entirely on them. Credit card companies like Capital One are taking advantage of consumers by using deceptive practices, and this must stop.