Discover Bank will pay millions in fees to settle accusations by regulators that it pressured credit card customers to buy costly add-on services like payment protection and identity theft protection.
Discover, the sixth-biggest U.S. credit card issuer, will pay a $14 million fine and refund $200 million directly to more than 3.5 million customers, federal authorities said Monday.
The company's call-center workers enrolled customers in the programs without their consent, misled them about the benefits and left customers thinking the products were free, regulators said.
KRMG consumer advocate Clark Howard says "it's about time."
"This is something that I've had calls on for a good while. People, out of the blue, have charges on their accounts for credit protection (and other) services."
Clark Howard says that's why it's important for consumers to keep close tabs on their credit card statements.
"A lot of people who would call me about this, didn't notice for month, after month, after month they were being charged. The things is, if you don't go through your credit card bills closely, once 60 days has passed by, you lose the right to dispute something, even if it's the theft of your money."
Discover, part of Discover Financial Services, did not immediately respond to a request for comment. Under the settlement, the company neither admitted nor denied the allegations.
Discover's telemarketing scripts included misleading language that confused consumers about whether they were buying a product or just agreeing to consider it, the agencies said. They said telemarketers spoke quickly during the part of the call where the prices and terms of products are described.
The order mentions four products sold by Discover: Payment Protection, Credit Score Tracker, Identity Theft Protection and Wallet Protection. Anyone who paid for those services between Dec. 1, 2007, and Aug. 31, 2011, will be repaid at least 90 days' worth of fees. About 2 million customers will be repaid all of the fees they were charged.
In addition to the refunds and fine, Discover agreed to change its telemarketing approach and employ an independent auditor to oversee its compliance with the order.