The Consumer Financial Protection Bureau (CFPB) and Federal Deposit Insurance Corporation (FDIC) have taken action against another credit card issuer. This time it was Discover, which settled for $200 million for charges that they misled cardholders about its payment-protection product since 2010. In addition, they will pay a $14 million civil penalty split by the two agencies for joint enforcement action. Discover didn’t admit or deny that they did so, but agreed to an independent audit and to stop the practices.
According to the Consumer Financial Protection Bureau, telemarketers from December 1, 2007 to August 31, 2011, sold payment protection, credit score tracking and other credit card extras and misled consumers about charges, and withheld important information or spoke quickly when they disclosed prices and terms of the add-on products. Some cardholders were enrolled without their consent. The telemarketing scripts suggested that the cardholders would not be charged until they reviewed the written materials, but were not given the written materials until after the consumers paid for the service.
Refunds to consumers
Discover is required to offer refunds to more than 3.5 million cardholders, by early 2013. Reimbursement will be based on when they bought the products and the length of time they kept them. Approximately 2 million cardholders will get full refunds of fees they paid, minus any refunds they already received. The average payout will be approximately $54 per cardholder.
The Consumer Financial Protection Bureau also settled with Capital One bank for $210 million in July 2012. This involved charges that call center representatives misled consumer into paying for extra credit card products.
“We continue to expect that more such actions will follow,” Cordray told reporters on Monday, September 24. “In the meantime, we’re signaling as clearly as we can that other financial institutions should review their marketing practices to ensure that they are not deceiving or misleading consumers into purchasing financial products or services,” he said.
Are you are Discover Card cardholder and paid for payment protection services? You may be due a refund. If you paid for these services with other credit card companies, you may be due a refund also. If you haven’t purchased payment protection services that insure credit card payments will be made if you are unemployed or in an accident, you’ve probably made a wise choice. Many consider these payment protection plans to be worthless services.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.