What's wrong credit card companies?
Here is an industry that has been repeatedly chastised and penalized for all sorts of bad behavior -- an industry that abused its customers so badly for so long, with hidden fees and usurious interest rates, that one of the first things Democrats did when they took control of the White House in 2009 was to enact legislation to rein in credit card issuers.
You would think this industry would now be on its best behavior. Wrong. It's still lying and still cheating. Apparently, predatory behavior is just part of the credit card business model.
Yesterday the Consumer Financial Protection Bureau and the FDIC announced a settlement with Discover over deceptive marketing practices. Discover will pay $200 million to over 3.5 million customers "who were deceived and misled into buying Discover’s credit card add-on products," according to CFPB's director, Richard Cordray.
According to Cordray:
Discover used deceptive telemarketing techniques when it sold consumers all four of these add-on products. Discover’s telemarketing scripts contained many misrepresentations, implying that these products were free of charge and simply “added benefits” that came with having a Discover card. As a result, many consumers did not realize that their accounts were actually charged for these products.
Furthermore, investigators from the Consumer Bureau and the FDIC listened to numerous recorded sales calls where Discover’s telemarketers spoke unusually fast when explaining the cost and product terms, and even processed purchases without the consent of consumers. In certain cases, Discover’s telemarketing scripts indicated to consumers that they would receive a letter with more information before being required to pay for a product. However, Discover initiated the consumer’s purchase of the product before even sending this material out.
If all this sounds familiar, it's because the CFPB recently nailed Capital One for doing basically the same thing. In other words, this is not an isolated instance of bad behavior: Two huge players in the credit card industry have both been found to be deceiving their customers. My guess is that other cases will also come to light.
The moral of the story here is that regulators can't turn their back for a second when it comes to financial services and, if anything, the much loathed CFPB needs even more resources to do its job.