Discover to Refund $200 Million

Discover Bank will pay a $14 million fine to the government and refund about $200 million to 3.5 million consumers, according to the Consumer Finance Protection Bureau.

Are you thinking, “I’ve heard this story before?” You’re right – I wrote about similar recent cases in Should You Consider Debt Protection? 3 Alternatives just three weeks ago. Now it’s Discover’s turn, and they’re in trouble for engaging in “deceptive telemarketing tactics to sell the company’s credit card add-on products,” like debt and identity theft protection and credit monitoring. The CFPB says consumers were…

• Misled about the fact that there was a charge for the products: Discover’s telemarketing scripts often used language implying that the products were additional free “benefits,” rather than products for which a fee would be applied to their accounts.

• Misled about whether they had purchased the products: The telemarketing scripts frequently suggested that consumers would not be charged for the products until after having a chance to review printed materials from Discover. Discover, however, did not provide consumers with the information until after Discover had already initiated the consumer’s purchase of a product.

• Enrolled without their consent: Discover representatives processed the add-on product purchases without some consumers’ consent. These consumers were then charged for the product on their Discover card.

• Withheld material information about eligibility requirements for certain benefits: Discover’s telemarketers typically did not disclose critical eligibility requirements for certain payment protection benefits, such as exclusions for pre-existing medical conditions and certain limitations concerning employment.

So here’s what happens now. They’ll pay up, halt their deception, undergo an independent audit, and make refunds without any action on the part of customers. Should you expect a refund? Here are the details CFPB gives…

Discover will pay approximately $200 million in restitution to more than 3.5 million consumers who were charged for one or more of the products between December 1, 2007 and August 31, 2011. All consumers affected by Discover’s deceptive practices regarding these products, except those who affirmatively made use of Payment Protection, will receive restitution with amounts varying depending on when they purchased, and how long they held, the add-on products. All consumers will receive at least 90 days’ worth of fees paid (minus any refunds they have already received), with approximately 2 million consumers receiving full restitution of all of the fees they paid.