Discover Accused of Misleading Tactics

Cottage Grove, MNWhen it comes to credit card abuse, many customers may have thought the new credit card laws offered them greater protection from predatory credit card practices. In truth, there is some protection from credit card rate hikes and credit card fraud, but those restrictions have forced credit card companies to find new ways of generating profits—all at the consumer's expense.

Minnesota's attorney general filed a lawsuit alleging Discover Financial Services misled consumers about optional credit card products. Those products included identity theft protection and payment protection services. According to The New York Times (12/06/10), customers say they thought Discover was just making courtesy calls, not trying to make sales. The lawsuit alleges Discover made "aggressive, misleading and deceptive" telemarketing calls.

Some customers complained that they were not only signed up for products they did not agree to, but they were also charged on their credit cards without approving the charge. Still others say the salespeople made misleading statements that the customers said "yes" to, without realizing the "yes" was an approval for the financial products. Consumers in Minnesota filed complaints about Discover's tactics, which led to the lawsuit being filed by the attorney general's office.

"People expect their credit card company to help them avoid fraudulent charges, not make them," said Attorney General Swanson.

Discover officials said in a prepared statement that their policy is not to comment on pending litigation, but that it is not in the company's interest to sell products that do not enhance its relationship with card members.

According to the lawsuit, salespeople phoned cardholders and claimed to be ensuring the cardholders understood all benefits that came with their card. During the phone call, however, some telemarketers allegedly intentionally altered the wording of the disclosure, made the disclosure difficult to understand or omitted information that indicated the customer was purchasing the service. In other situations, consumers thought they were agreeing to have the company send them further information and did not realize they were approving a purchase.

"The company charged some consumers for expensive add-on financial products without their understanding that their credit cards would be charged. The irony is that the credit card company markets these products as a way for consumers to protect themselves from fraudulent or unauthorized credit card charges and financial instability in the bad economy," said Attorney General Swanson in a news release (ag.state.mn.us; 12/06/10).

The attorney general's lawsuit seeks penalties and restitution for customers. Defendants named in the lawsuit include Discover Bank, DFS Services, LLC, Discover's processing company, and Discover Financial Services.

A similar lawsuit was also filed in New Jersey against Discover. That lawsuit alleges customers were enrolled in programs and charged for them without ever being called.