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Thursday, July 19, 2012

Capital One: Enter Ethicist

The Consumer Financial Protection Bureau announced in July 2012 findings that a vender working for Capital One “had pressured and deceived” credit-card customers into buying products “presented as a way to protect” the customers from identity theft and hardships like unemployment and disability. In a related action, the Office of the Comptroller of the Currency required the bank to reimburse customers “harmed by unfair billing practices” from 2002 to 2011. The bank had billed customers even though it had failed to provide full use of the products sold. “Unfair and deceptive practices will not be tolerated,” Thomas J. Curry, the comptroller, said.

Regulators claim that the bank deceptively pushed plans that promise to forgive or reduce the debts of card holders in the event that they lose their jobs, become disabled or die. The bank also offered credit monitoring, a feature that came with identity-theft protection and “credit education” for customers with a spotty borrowing history. According to the consumer bureau, “call centers for the bank marketed and sold the products to ineligible unemployed consumers and forced the products without the consumer’s consent. In other cases, according to the bureau, the bank employed “high pressure tactics,” including misleading customers into thinking the product was free, mandatory and would bolster credit scores.”

The attorney general of Mississippi, Jim Hood, sued Capital One in June 2012 for reportedly “slamming” customers by enrolling them in payment protection programs without their consent and then hitting them with fees. Nevertheless, a top official at the American Bankers Association, Kenneth Clayton, said that for some people “the value of the product is worth the cost. People buy these products for a number of reasons, including peace of mind and knowing they will be protected if certain untimely life events make it difficult to repay their bills.” This assumes that the customers give their consent, not to mention know that the product exists.

In addition to demonstrating that a company can operate without any regard whatsoever of business ethics as if with impunity, this case implies that industry self-regulation would likely ignore rather than self-police infractions. Typically, a call-center is characterized by a narrow focus on getting the sale, regardless of how. Front-line supervisors are oriented only to the numbers, as are the employees on the phones, given the quantitative basis of any bonus arrangement. Cutting corners is simply part of the culture; no real regard whatsoever for the potential customer enters in. In Kantian terms, the rational being on the other end of the phone is only a means, rather than also an end in himself. “Single-minded” undoubtedly describes the orientation of the human beings working in the call center of the vender hired by Capital One. Fining the bank, and forcing it to reimburse customers, is insufficient to deconstruct this dynamic—it being so tight and so self-contained in the very design of a call center. Undergirding the design and culture is the obsessive-compulsive mentality that no number is ever enough and time is somehow all too short, combined with a sort of sociopathic lack of concern or empathy for the person on the other end of the line. There is a certain distance in just having a voice as the object to be manipulated (and even ignored when it becomes an obstacle).

To make more of a dent in relaxing the oppressive fixation on maximizing numbers by pushing customers even without their even being aware of having consented to the purchase, the upper managements of the companies running or owning call centers could mandate that an ethics officer have access to the call records and the authority to deal with infractions by even removing employees and supervisors. The officer could also hire “mystery employees” to get an insider view on the actual practices and the related culture “on the ground.” With out the realism of such means, holding “ethical awareness” workshops or training sessions is apt to be a waste of time (and resources).

Furthermore, the upper management of a company housing a calling center could instruct middle management to reduce the quantitative pressure. To be sure, this advice does seem overly idealistic, especially relative to giving an ethics officer the authority to fire employees (including supervisors). However, because an upper management could be motivated to take into consideration the less tangible, long-term costs associated with excessive pressure and the related ethical compromises, greater involvement of managers at that level could impact call-center culture by altering the design of incentives and the values that are rewarded or tolerated. A company that is merely a call center is an ethical accident waiting to happen; higher levels, and even other profit-centers, are necessary to moderate the exclusivity in the single-minded obsessiveness.

In short, companies do exist whose people are oblivious to ethical constraints. Such single-minded people are difficult indeed to “reform,” as values die hard. In addition to adding to the amount of the fines exacted by regulators, company boards of directors can insert upper managers and ethical officers “on the ground” to moderate or expunge the relatively narrow mentality that can otherwise dominate there.


Ben Protess and Jessica Silver-Greenberg, “In Its First Action, Consumer Bureau Takes Aim at Capital One,” The New York Times, July 18, 2012. http://dealbook.nytimes.com/2012/07/18/consumer-watchdog-fines-capital-one-for-deceptive-credit-card-practices/?ref=business