WASHINGTON (9/25/12)--The deceptive telemarketing tactics that Discover Bank employees used to sell payment protection plans and other credit card add-on products, and resulted in a joint Federal Deposit Insurance Corp. (FDIC)/Consumer Financial Protection Bureau (CFPB) action against that financial institution, were detailed in a Monday release.
Discover Financial Services late last week agreed to repay $200 million to cardholders who purchased card protection products by telephone from December 2007 to August 2011.
Discover also agreed to pay another combined $14 million in civil monetary penalties to the FDIC and the CFPB, and to enhance the company's marketing practices. Affected consumers will not need to take any action to receive their refunds. They will receive checks or will have the money they are owed credited to their Discover card account, the agencies said.
The FDIC and CFPB in a release said the fines follow a joint investigation which found that Discover mislead consumers into paying for various credit card "add-on products," including payment protection, credit score tracking, identity theft protection, and wallet protection. According to the agencies, telemarketers promoting these products may have deceived consumers about whether they were actually purchasing these products, and sped up their speech during portions of consumer marketing calls that disclosed the prices and terms of these products.
According to the FDIC and CFPB, the products in question were:
- Payment Protection, which was marketed as a product that allows consumers to put their payments on hold for up to two years in the event of unemployment, hospitalization, or other qualifying life events;
- A Credit Score Tracker, which is designed to allow a customer unlimited access to his or her credit reports and credit score;
- Identity Theft Protection, which was marketed as providing daily credit monitoring; and
- A Wallet Protection product was sold as a service to help a consumer cancel credit cards in the event that his or her wallet is stolen.
Many cardholders were led to believe some products were free, when, in fact, they were paying for them. The telemarketing scripts frequently suggested that consumers would not be charged for the products until after having a chance to review printed materials from Discover. Discover, however, did not provide consumers with the information until after Discover had already initiated the consumer's purchase of a product.
Consumer were also at times enrolled in these protection programs, and charged for the products, without their consent. Elements of the payment protection benefits, such as exclusions for pre-existing medical conditions and certain limitations concerning employment, were also not disclosed to consumers, the agencies said.
The Discover agreement follows by just a couple months a separate agreement between Capital One Financial and regulators, which revolved around that company's call center allegedly leading customers to pay too much for credit card products. Capitol One also agreed to pay about $200 million in refunds.
For more on the Discover agreement, use the resource link.