Feds order Discover to refund $200M to cardholders
WASHINGTON (AP) — 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 credit monitoring.
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.
The action was brought by the new Consumer Financial Protection Bureau and the Federal Deposit Insurance Corp. Discover said this summer that it expected an enforcement action about add-on products.
It is only the third public enforcement action by the consumer bureau, which was created under the 2010 financial overhaul law to protect consumers from excessive or hidden fees and other financial threats. The first was a similar order against Capital One, another big issuer of cards.
American Express also expects to pay refunds and fines related to add-on products, according to its most recent quarterly filing with regulators.
Discover is part of Discover Financial Services. In a statement late Friday, chairman and CEO David Nelms said: "We have worked hard to earn the loyalty of our cardmembers, and we are committed to marketing our products responsibly."
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