The No. 1 issuer of store credit cards is paying $225 million to 749,000 consumers, with most of the money going to Spanish-speakers excluded from debt relief offers
The No. 1 issuer of store credit cards will pay $225 million in refunds to customers for discrimination and deceptive marketing practices, regulators announced Thursday.
GE Capital’s consumer finance unit, recently renamed Synchrony, agreed to pay $56 million to 638,000 cardholders who were pitched bad information about the company’s debt cancellation add-on product.
Another 108,000 customers who are Spanish speakers or Puerto Rico residents are due $169 million for being left out of debt relief offers that other people received.
“This kind of conduct has no place in the consumer financial marketplace,” said Richard Cordray, director of the Consumer Financial Protection Bureau, in announcing the order. Synchrony consented to the order without admitting wrongdoing.
The crackdown marks the agency’s sixth enforcement action against a major credit card issuer, with refunds totaling more than $1.6 billion.
Of the $169 million in compensation for discrimination, $138.1 million has already been paid to consumers, said Jocelyn Samuels, director of the Justice Department’s Civil Rights Division, who participated in the news conference announcing the order. The penalty was the largest levied for credit card discrimination, she said.
To some people having trouble paying their balance, GE Capital offered settlements of up to 75 percent off, the CFPB said. Others were offered a statement credit of $25 to $100 for making a minimum payment. The offers were made from January 2009 to March 2012.But the offers were not extended to people who chose Spanish as the language for their communications with the company, or who lived in Puerto Rico.
“These consumers did not know they were missing out on anything, so did not even know they were being discriminated against,” Cordray said.
GE Capital reported the discrimination to regulators and began making payments to affected consumers before the regulatory order, Samuels said. As a result, the company was not fined for the discrimination beyond the compensation due to customers.
People who are due refunds will be contacted by the company, so they don’t need to take action themselves, the CFPB said. In addition to paying compensation, Synchrony will help consumers revise negative credit report information that resulted from the discrimination.
The refunds come out to $88 for each customer refunded for deceptive marketing, and $1,565 per customer excluded from debt relief offers. Most of the compensation for discrimination will come in the form of reductions in charged-off balances, according to the order. For others owed a refund, the order said that funds will come in the form of a credit on their billing statements, while those who no longer have a card will get a check. Synchrony representatives were not available to comment about the settlement announcement.
“We hope the detection of this issue … will prompt the rest of the industry to take a careful look at how they structure and publicize offers,” Samuels said.
Debt cancellation marketing flawed
The deceptive marketing of add-ons was uncovered by a CFPB examination that began in 2012, and the card issuer was fined $3.5 million in addition to the refunds due, the agency said.
Consumers were told that debt cancellation products named “Card Security,” “Account Security” and others would wipe out part of their balance under certain hardship conditions. But telemarketers would sell the insurance-like product to people they knew were ineligible for the benefit, such as those with a disability or in retirement.
In some instances, consumers were not even aware they were agreeing to be charged for a service. “Telemarketers made statements like, ‘Let’s go ahead and take care of your card security today,’ ” Cordray said, leaving it unclear that consumers were buying a product.
Credit card enforcement has been a focus of the consumer protection agency since it opened its doors in 2011. Before the latest announcement it had cracked down on five major card issuers and generated refunds for about 10.8 million consumers, mostly for payment protection and debt cancellation products.
The latest action brings the number of consumers refunded money to 11.6 million.
|COSTLY DECEPTION: REFUNDS FOR CREDIT CARD MARKETING|
|Card issuer||Refunds||Announced||Customers given refunds|
|Capital One||$150 million||7/18/2013||2,000,000|
|American Express||$59.5 million||12/4/2013||335,000|
|Bank of America||$727 million||4/9/2014||2,900,000|
|Synchrony Bank||$225 million||6/19/2014||749,000|