The FDIC and the CFPB said they have executed a joint public enforcement action that will require Discover Bank to refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty.
The agencies said Monday they jointly determined that Discover engaged in deceptive telemarketing tactics to sell the company’s credit card add-on products such as payment protection, credit score tracking, identity theft protection and wallet protection.
The agencies said in a release that Discover’s telemarketing scripts contained misleading language that deceived consumers about whether they were actually purchasing a product. Discover’s telemarketers also often downplayed key terms and spoke quickly while disclosing prices and terms of the add-on products.
Because of the misleading language in the scripts and the actions of Discover’s telemarketers, the regulators said, consumers were misled about charges for the products and whether or not they had purchased them. Customers were also enrolled in the products without consent, and had material information about eligibility requirements for benefits withheld.
Under the order, Discover has agreed to make adjustments to its telemarketing strategies, submit a compliance plan to the CFPB and the FDIC for approval, and take specific corrective actions related to the products.
Discover will also pay approximately $200 million in restitution to more than 3.5 million consumers who were charged for one or more of the products between Dec. 1, 2007 and Aug. 31, 2011. All consumers will receive at least 90 days’ worth of fees paid and approximately 2 million consumers will receive full restitution. The victims will not be required to take any action to receive refunds or credits to their Discover card accounts.
The agencies imposed a civil penalty of $14 million, which will be divided between the U.S. Treasury and the CFPB’s Civil Penalty Fund. Discover must also work with an independent auditor, which will confirm the bank’s compliance with the order.
The full text of the Joint FDIC-CFPB Consent Order with Discover is available on the CFPB’s website.