Tuesday, January 20, 2015
Attorney general negotiates settlement on misleading credit card plans
Attorney General Chris Koster announced today negotiated settlements with three major credit-card companies over allegations that they misleadingly marketed payment-protection plans and other add-on products to Missouri consumers. In total, the three companies will pay $2,235,000 to the state and agree to cease misleading marketing of these products in Missouri.
According to Koster, consumers were led to believe that for a monthly fee their credit-card payments could be suspended if they became unemployed or disabled. However, after making monthly protection plan payments, consumers who attempted to make claims were often told they did not qualify for the benefit. Additionally, the monthly protection plan fee was added to the consumer’s credit-card balance, reducing the amount of the consumer’s available credit by the amount of the fee. Even when card issuers agreed to waive minimum payments during a hardship, the consumer’s balance often increased due to charged interest and fees, including the continued payment-protection plan fee.
Some consumers were unaware they had been signed up for a payment-protection plan or other add-on product, while others were misleadingly upsold after calling their card issuer on another matter or solicited directly by telemarketers. Consumers were also automatically enrolled if they failed to read and respond to a notice sent by mail.
“Many Missouri consumers paid hundreds of dollars for add-on protections and never received any benefit,” said Koster. “These products were aggressively marketed with obscure terms and conditions, which enabled these companies to reap a financial benefit at their customers’ expense.”
Under the terms of the settlements announced today, Discover will pay $760,000, Capital One will pay $740,000, and HSBC will pay $825,000 to Missouri Merchandising Practices Revolving Fund, which funds consumer-protection education and enforcement. All three companies are prohibited from selling payment-protection products and related add-on products, such as identity-theft protection, in a way that misleads consumers.
Koster said that Missourians should check their monthly statements for charges from payment-protection plan products and add-on products. If such charges appear, and the consumer did not enroll in the product or no longer wishes to have the product, they should call their credit card company immediately to cancel the product.
Koster reminds Missourians to contact his Consumer Protection Hotline to report cancellation issues or related consumer matters by filing a complaint online or by calling 800-392-8222.