Cardholders were misled over payment ‘insurance’ add-ons, agency says
The little-known institution behind dozens of store cards must refund $61.5 million to credit card holders for false marketing of payment protection programs, the Federal Deposit Insurance Corp. announced Tuesday.
Comenity Bank in Wilmington, Delaware, and Comenity Capital Bank in Salt Lake City, Utah, entered a settlement with regulators over the marketing of its “Account Assure” and “Account Assure Pro” add-on products. Payment protection is an insurance-like product that is supposed to cover your credit card payments in an emergency such as job loss.
The banks, units of Alliance Data Systems Corp., back cards from niche retailers ranging from Abercrombie and Victoria’s Secret to Zgallerie. According to documents on file with the U.S. Consumer Financial Protection Bureau, the two Comenity units stood behind about 150 store cards as of the first quarter of 2014.“Consumers who are eligible for relief under the settlement are not required to take any action to receive restitution,” the FDIC announcement said. The violations occurred between January 2008 and September 2014. People with a current account should receive a statement credit, while others should receive a check by mail, the FDIC said. Refunds will begin after the FDIC approves a refund plan to be submitted by the company within 30 days.
The FDIC says the Comenity units violated the Federal Trade Commission Act by falsely:
- Telling customers they wouldn’t be charged a fee if they didn’t carry a balance.
- Assuring customers fee refunds would be issued to those who canceled coverage within 30 days.
- Promising gift cards or account credits for enrolling in the program.
The order also states that the banks must clearly explain all the requirements that cardholders must meet in order to receive account credits or gift cards that are promoted as incentives to enroll in Account Assure.
The misstatements often occurred when cardholders were transferred to third-party salespeople after calling to activate their cards, the FDIC said. Cardholders may be due a refund for more than one violation. The FDIC will audit the banks’ refund efforts.
In addition to the refunds being paid to customers, the Comenity banks will pay $2.5 million in civil penalties to the FDIC.
(Update: In 2016, Comenity had set up a website with details about the refunds, which said refunds were to be distributed beginning in the first quarter of 2016. That site has since been taken down.)
Tuesday’s announcement brings to 11 the number of banks and third-party marketing companies that have been ordered to refund their customers for their marketing practices of add-on credit card products. In all, the companies have been ordered to repay almost $2.5 billion in refunds to nearly 21 million customers.
|COMENITY CARDS: WHICH RETAILERS OFFER THEM|
|The following lists Comenity card agreements filed at the U.S. Consumer Financial Protection Bureau as of the first quarter of 2014. Not all the cards necessarily participated in the add-on products subject to refunds. The list excludes duplicate names and agreements where the merchant’s name does not appear.|
|Alon||Dots||Loft MC||Smile Generation Financial|
|American Home||Drapers And Damons||Mandee||Solutions|
|American Laser Skincare||Dress Barn||Marathon||Sports Authority|
|Ann Taylor||Dwolla||Maurices||Springstone Financial|
|Anne Geddes Visa||Eddie Bauer||Metrostyle||Stage Stores|
|Annie Sez||El Dorado Furniture||Motorola||Talbots|
|Appleseeds||Elder Beerman||New York Company||Taylor Rental|
|Arhaus Furniture||Express||Norm Thompson||Taylor Rental Discover|
|Ashley Stewart||Fastline||Ohio University MC||Taylor Rental Discover Google Advisor|
|Avenue||Gander Mountain||Old Pueblo Traders||The Buckle|
|Barneys||Gardner White Furniture||Onestopplus.com||The Company Store|
|Bealls Florida||Gem||Overtons MC||The Limited|
|Bealls Outlet||Giant Eagle Employee||Pacific Sunwear||The Roomplace|
|Bealls Stage Stores||Gold Violin||Palais Royal||The Sportsmans Guide Visa|
|Bedford Fair||Goodys||PayPal BML||The Tog Shop|
|Bergners||Gordmans||PayPal CompUSA||The Sportsmans Guide Visa Google Advisor|
|Blair||Grand Rental Station||PayPal HpDirect||Tiger Direct|
|Blue Nile||Haband||PayPal JCWhitney||Torrid|
|Bon Ton||Healthiplan Medical||PayPal MacMall||Trek|
|Boston Store||Henri Bendel||PayPal NewEgg||True Value|
|Brylane Home||Herbergers||PayPal RossSimons||True Value Discover|
|Burkes Outlet||Home And Garden Showplace||PayPal TigerDirect||Undergear|
|Carter Lumber DIY||Iddeal||Petland||Victorias Secret|
|Catherines||Ideal Image||Pier 1 Imports||Vitacost MC|
|Chadwicks||JCrew||Pottery Barn||West Elm|
|Christopher Banks||Jessica London||Premier Designs||Westgate MC|
|Columbian Emerald||Justice||Reeds Jewelers||Woman Within|
|Crate and Barrel||King Size||Restoration Hardware||Younkers|
|Credo||Lane Bryant||Roamans||Your Tuition Solution|
|Davids Bridal||Lifestyle Lift||Sahalie||Zgallerie|