Telemarketers who signed credit card customers up for payment protection and credit score monitoring services spoke too quickly for listeners to understand them, alleged a lawsuit brought against Discover Card Services by the FDIC and the Consumer Financial Protection Bureau (CFPB). They also say that Discover purposely trained its employees to do this, in order to lure cardholders into signing up for products with monthly fees.
This week Discover has agreed to settle the lawsuit, paying a $14 million find as well as refunding $200 million to over 3.5 million customers who were taken in by the scheme.
But was it a scheme at all? Discover neither denies nor admits the allegations, simply saying, “We have worked hard to earn the loyalty of our cardmembers, and we are committed to marketing our products responsibly. As always, we will continue to strive to deliver the highest standards of customer service and satisfaction.” That’s what Discover’s CEO, David Nelms, said in a statement last Friday after the settlement plan was revealed.
The CFPB and the FDIC, however, say that they “jointly determined that Discover engaged in deceptive telemarketing tactics to sell the company’s credit card add-on products.”
Payment Protection and Credit Score Tracker – Unfairly Marketed?
The programs at issue are called Payment Protection, Credit Score Tracker, Identity Theft Protection and Wallet Protection , which Discover Card members could add to their accounts for a monthly fee – usually after a free or refundable introductory period. All customers had to do was say “yes” to telemarketers asking questions about whether they wanted to be protected in case of illness, unemployment, or other unexpected events, and whether they wanted to get a free credit report and be notified in case of negative information being added to their credit reports.
Many customers, in an effort to simply get the telemarketer off the phone, may have simply agreed to whatever was asked, not realizing it would cost them anything. Discover’s telemarketers are accused of enrolling customers without their express consent, misleading them about the benefits of the programs, and leading customers to believe the products were free.
In their joint statement about the case, the CFPB and the FDIC said that “Payment Protection 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. Discover also sold its Credit Score Tracker, designed to allow a customer unlimited access to his or her credit reports and credit score.”
Anyone who was charged for any of the four services named in the lawsuit between December 1, 2007 and August 31, 2011, will be refunded a minimum of 90 days worth of fees. Some customers will receive refunds for all fees charged by these programs.
Practices Not Uncommon
Discover Card isn’t the only company being accused of deceptive telemarketing practices – according to recently-filed quarterly statements, American Express also anticipates paying refunds and fines for the same thing – add-on product marketing.
It’s a good idea for customers to ask to be put on do not call lists for telemarketers – even those who are representatives of credit cards that they carry. The people who make these calls are typically not even direct employees of the credit card companies, which often contract out their add-on product marketing.
In the future, they will likely be more careful to whom they contract out these marketing jobs. Part of the Discover settlement mandates that they change their telemarketing approach and pay for outside auditing to ensure compliance with the court order.