Regulators slap Discover with penalty for deceptive credit card marketing

A pair of financial regulators is assessing a $214 million penalty on Discover Bank for employing deceptive telemarketing and sales tactics in pushing add-ons to credit cards.

Regulators declared Monday that Discover used language in pushing add-ons like credit score tracking and payment protection that did not make it entirely clear there was an added cost for the services, and some marketers even enrolled cardholders in these add-ons without their consent. It also found that marketers downplayed key terms or spoke quickly when disclosing the costs of these services.

The Federal Deposit Insurance Corporation (FDIC) initiated an investigation into Discover's marketing practices, and the Consumer Financial Protection Bureau (CFPB) joined the effort last year.

Under the penalty, Discover has agreed to refund roughly $200 million to more than 3.5 million credit card customers who were charged for these additional services from the end of 2007 through August 2011. It also agreed to end its deceptive marketing practices, and pay out a $14 million civil penalty to the government. The bank has also agreed to an independent audit of its practices, the regulators said.

“We have worked hard to earn the loyalty of our cardmembers, and we are committed to marketing our products responsibly,” said David Nelms, chairman and chief executive officer of Discover, in a statement. “As always, we will continue to strive to deliver the highest standards of customer service and satisfaction.”

In July, the CFPB, alongside the Office of the Comptroller of the Currency, levied a similar penalty against Capital One for its credit card marketing practices. For its deceptive marketing practices, Capital One had to pay $150 million to 2 million card customers, as well as pay a $60 million penalty.

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