Minnesota Attorney General Lori Swanson has filed a lawsuit against Discover, alleging the credit card giant makes millions through deceiving consumers into purchasing protection plans.
The lawsuit accuses Discover Financial Services of earning nearly $300 million a year through “highly deceptive and misleading telemarketing” that enrolls consumers into expensive “protection” plans that they never benefit from because they don’t even know they’ve signed up.
“Discover is in a position to do this because, unlike a typical telemarketer, it is the consumer’s credit card company and already has their credit card number,” the attorney general says in the lawsuit.
These deceptive telemarketing tactics, she says, have boosted Discover’s revenue from its four protection plans by more than 37% in the past two years.
The lawsuit claims Discover pushes its protection plans “as ways for consumers to protect themselves from fraudulent or unauthorized charges or to enhance their financial security against such hazards or hardships like job loss, sickness, identity theft, lost wallets or low credit scores. Yet Discover often enrolls consumers in these products…without their meaningful consent or understanding that their credit cards will be charged for these products.”
Customers are allegedly given the impression that these plans are a “regular feature” or an added benefit of the card by telemarketers who call under the guise of a “courtesy call.” The telemarketers then deceptively claim that the call was a “disclosure” when in fact they rarely mention terms such as “enrollment” or butcher the text in order to confuse the cardholder.
“Telemarketers take advantage of this confusion by acting as if they regret having to read legal mumbo-jumbo to the cardholder, but that it is required for some unknown legal reason,” the complaint says.
Even if customers don’t give an affirmative response during the call, or simply agree to receive an information packet about the plan, they are often still enrolled without their knowledge.
The attorney general estimates tens of thousands of Minnesotans have been charged millions of dollars for enrollment in the plans.
A copy of the attorney general’s Discover Card Payment Protection Plan Lawsuit can be read here.
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