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Discover Bank Forced to Pay $200 Million Refund and $14 Million Fine

There’s no place for deceptive marketing tactics. Discover Bank‘s credit card customers allegedly found themselves on the receiving end of a sales pitch without knowing it. The Consumer Financial Protection Bureau (CFPB), teamed with the Federal Deposit Insurance Corporation (FDIC), uncovered evidence of slimy sales tactics. In many cases, consumers thought they were adding free services to their credit card accounts, but these services carried expenses not always fully disclosed.

These are the products sold by Discover through misleading tactics, according to the CFPB:

  • “Payment Protection.” Facing unemployment or other obstacles preventing credit card users from paying their monthly credit card bills, Payment Protection would allow these customers to put their credit card bill on hold for up to two years.
  • “Credit ScoreTracker.” This service would allow credit card customers unlimited access to credit reports and a credit score. You can always get three free credit reports — one from each bureau — on an annual basis from the officially sanctioned Many services allow you to access your credit scores, but the primary score used by lenders, the FICO score, must be purchased. The Credit ScoreTracker service likely provided one of the credit scores you can find for free.
  • “Identity Theft Protection.” This product is described as daily credit monitoring. Customers would receive email alerts when there is a change to a credit report.
  • “Wallet Protection.” By providing Discover information about all the credit cards you carry in your wallet, you can have Discover contact all issuers for you in the event that your wallet and its contents are stolen. Discover would also provide up to $1,000 in emergency cash, as a cash advance, waiving the cash advance fee but not the high interest rate.

Even today on Discover’s website, these products are advertised without any indication that enrollment requires paying a fee. The real problems, however, are in the telemarketing scripts prepared for customer service representatives, used when new customers call to activate credit cards. The Consumer Financial Protection Bureau described the problems with these scripts, obviously intended to make sales by sharing as little information as possible, particularly about fees.

  • The scripts often implied the products were free benefits, rather than fee-based add-on products.
  • The scripts frequently suggested that customers would have a chance to review printed information from Discover before being charged a fee.
  • Some representatives activated the products without consumers’ consent.
  • Representatives did not always disclose eligibility requirements for benefits.

As a result of these findings, Discover will be required to stop the deceptive marketing, pay refunds to customers, and pay a fine. Discover will return a total of $200 million to customers. Those affected customers due a refund who are still current customers of Discover need only to wait for a credit to hit their accounts. Former Discover customers due a refund will receive a check, presumably to the address last known to Discover. The amount of the refund will be at least 90 days’ worth of fees minus any refunds already sent, and many customers will receive a full refund for as long as they were enrolled in these products.

Discover will also pay a $14 million penalty to the government for its deceptive tactics.

What to do when activating a credit card

The activation process is disguised as a protective measure but it really just a sales opportunity. Once the credit card issuer has you on the phone, they have the chance to try to take more of your money by offering products of dubious value. Some credit card issuers use automated response systems for activating, but imply that you need to stay on the phone to talk to a customer service representative to complete the activation.

If you need to call to activate your credit card, whether you use an automated system or are presented with a live representative immediately, don’t stay on the line once the card is activated. Doing so makes you vulnerable to sales tactics in which you play into scripts that are designed to get you to buy products, perhaps even without your knowledge. Once the activation is complete with the automated system, you can hang up even with the recording asks you to please hold for a representative. If you activated the card with a live representative, thank him or her for her time and promptly terminate the call.

Don’t be a victim due a refund later on.

If, however, for some reason these products, though often overpriced and unnecessary, are relevant to you, be aware that there is a fee. Ask directly about the cost and don’t accept any answer that isn’t direct. Ask about restrictions. For example, “Payment Protection” sounds like a valuable type of insurance to have if you expect to be in the hospital, but you may disqualified for its benefits for pre-existing conditions. Do not agree to pay anything or accept any service until you are familiar with its terms.

Regardless of whether you even get to this point in the sales pitch, remember to check your credit card statement (or use your online access) to ensure you weren’t enrolled without your permission. You should check your credit card activities relatively frequently to ensure it matches what you expect and there aren’t any charges you don’t recognize. The quicker you can take action when there are dubious charges, the less of a chance of you being liable for a purchase you didn’t intend to make or other types of fraud.

Photo: Jess Pac


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