FDIC Probe into Discover’s Sales Practices - Other News

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FDIC Probe into Discover’s Sales Practices

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FDIC Probe into Discover’s Sales Practices

The price per share of Discover Financial stock dipped upon the announcement made by the Federal Deposit Insurance Corp. that they will be conducting an investigation of the card issuer’s selling practices with regard to some of its products. This probe comes on the heels of several class action lawsuits which were filed in numerous U.S. District Courts across the country.

An examination will be made of how Discover marketed the following “protection” services:

  • Identity theft protection, which surveys a cardholder’s credit report in search of activity such as unauthorized address changes, unusual new accounts and other potentially fraudulent information.
  • Payment protection, a service that provides cardholders with the opportunity to put payments on hold for as long as two years should they suffer specific hardships such as hospitalization, disability, job layoff, death of a spouse or a state disaster. One-month payment holds are allowed for more positive events such as the birth of a child, adoption, marriage, retirement, new job or graduation.
  • Wallet protection, wherein customers can register their credit cards and, should their wallet be stolen, they can opt to be wired up to $1,000 emergency cash and their cards will be cancelled automatically.
  • Credit score tracker, a service that avails customers of their credit reports and scores online, as well as alerting them if their scores ever changes.

“An important point is that it’s not the actual product that’s in question, it’s the way that it was sold,” said Sanjay Sakhrani,l and analyst from Keefe, Bruyette & Woods to washingtonpost.com.

Discover altered the sales practices that are currently in contention following the first lawsuit that surfaced in California last year.

There have been eight pending class-action lawsuits filed against Discover over the way their protection products were marketed. In June, the credit card company revealed that they had come to an initial global settlement. The deal is still awaiting approval from a judge and the details of which have not yet been released.

Roughly 3% of Discover’s totally revenue comes from their credit protection business.

All credit cards terms, fees and rates mentioned in this article/post are actual on the posting date. See the current products’ Terms & Conditions on the issuing banks' websites.
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