Tuesday, September 25, 2012
Discover Financial Services has agreed to refund hundreds of millions of dollars to settle a regulatory probe of its credit card marketing practices.
The issuer's Discover Bank subsidiary will return $200 million to cardholders who purchased credit card protection products from the company via telephone unknowingly over a roughly three-and-a-half-year period beginning in December 2007, as part of an agreement with the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau, the company said late Friday.
Discover also agreed to pay a combined $14 million in penalties to the agencies and to improve its sales practices.
“We have worked hard to earn the loyalty of our cardmembers, and we are committed to marketing our products responsibly,” Discover CEO David Nelms said in a news release.
The agreement, which requires final regulatory approval, would conclude a joint look by the FDIC and CFPB into Discover's use of telemarketing calls to enroll cardholders in payment protection, identity-theft prevention and other fee-based products.
So far Discover, which faces a wave of lawsuits over its telemarketing practices, has agreed to pay $10.5 million to settle a class-action lawsuit and $2 million to the attorney general of Minnesota on related charges.
The company is facing lawsuits by attorneys general in West Virginia and Hawaii, and is being investigated by Missouri’s attorney general, according to regulatory filings.
The agreement comes roughly two months after the CFPB and the Office of the Comptroller of the Currency hit Capital One with a $210 million enforcement action over the marketing of its payment protection products.
By Brian Browdie
Discover Financial Services has agreed to refund hundreds of millions of dollars to settle a regulatory probe of its credit card marketing practices.
The issuer's Discover Bank subsidiary will return $200 million to cardholders who purchased credit card protection products from the company via telephone unknowingly over a roughly three-and-a-half-year period beginning in December 2007, as part of an agreement with the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau, the company said late Friday.
Discover also agreed to pay a combined $14 million in penalties to the agencies and to improve its sales practices.
“We have worked hard to earn the loyalty of our cardmembers, and we are committed to marketing our products responsibly,” Discover CEO David Nelms said in a news release.
The agreement, which requires final regulatory approval, would conclude a joint look by the FDIC and CFPB into Discover's use of telemarketing calls to enroll cardholders in payment protection, identity-theft prevention and other fee-based products.
So far Discover, which faces a wave of lawsuits over its telemarketing practices, has agreed to pay $10.5 million to settle a class-action lawsuit and $2 million to the attorney general of Minnesota on related charges.
The company is facing lawsuits by attorneys general in West Virginia and Hawaii, and is being investigated by Missouri’s attorney general, according to regulatory filings.
The agreement comes roughly two months after the CFPB and the Office of the Comptroller of the Currency hit Capital One with a $210 million enforcement action over the marketing of its payment protection products.
By Brian Browdie