Minnesota Attorney General Lori Swanson sued Discover on Dec. 6, accusing one of the nation’s biggest credit card companies of billing tens of thousands of Minnesota customers for account protection programs they didn’t want.
The lawsuit alleges that Discover Bank, DFS Services and parent company Discover Financial Services broke state consumer fraud and deceptive trade practices laws. Swanson sued on behalf of the Minnesota public but said the billing practices are likely widespread in other states. She is seeking refunds for Minnesota customers and civil penalties, but said she couldn’t estimate how much money that might amount to because she didn’t have a complete customer list for the state.
Swanson said Discover telemarketers talked fast, skipped over words and rushed customers through a script to sign them up for the programs, including payment protection, identity theft protection and credit monitoring. She said the phone conversations often started out as courtesy calls before the telemarketer brought up the protection programs, leaving consumers confused.
“It signs a lot of people up without any meeting of the minds or agreement that the people will actually buy the product,” she said at a news conference in her state Capitol office, where she played tapes of some of the calls.
Discover spokesman Matthew Towson declined to comment specifically on Swanson’s lawsuit, but addressed the programs in a statement.
“It’s not in Discover’s interest to sell a product that doesn’t enhance our relationship with our cardmembers. Many cardmembers find Discover’s protection products valuable as they provide peace of mind,” Towson said.
Swanson said the account protection programs brought in almost $300 million in sales for Discover last year as enrollment has grown.
She said she is looking into complaints about similar programs from other credit card companies, and warned consumers to be on guard against telemarketing calls from their credit card issuers and to monitor charges on their statements carefully.
Swanson played audio tape from two calls where the customers clearly tried to avoid signing up for the programs — but ended up being charged later.
On one call, business executive Brad Sparish of Cottage Grove stopped the telemarketer near the end of his spiel and asked, “I’m not automatically enrolled in this, am I?”
The telemarketer’s answer: “Oh Bradley, like I said, sir, don’t worry. All we do here today is we’ll mail everything out so you can take a look at it for yourself. And once you see some of the features and benefits that we have available in the offer, you know, if you look at it and see that it’s beneficial to you, that’s great but if not, that’s fine too, Bradley. You’re under absolutely no obligation whatever.”
Sparish, 50, said he canceled the $29.99-a-month payment protection plan after speaking with layers of management at Discover. He said the whole thing left him feeling “abused” and “a little bit slimy.”
“It was pretty tough to pick out what he was trying to sell,” Sparish said of the call.
On another tape, Minneapolis resident Jill Amundson can be heard asking for confirmation that she won’t be automatically enrolled in one of the programs. She got an assurance that she could decide whether to sign up “in the privacy of your own home.” Later, $181 in charges appeared on her Discover card over five or six months.
“I don’t think there could have been anything in that call that could have been perceived as, ‘Gee, she’s interested,’ or she’s saying yes,” said Amundson, 41.
She said Discover has promised to refund the charges.
The lawsuit was filed in Hennepin County District Court in Minneapolis.
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