Allegations of Abusive Credit Card Practices
On January 16th, 2019 Sterling Jewelers Inc.,owners of such brands as Kay Jewelers and Rogers Jewelers, reached an $11,000,000 settlement with the Consumer Financial Protection Bureau ("CFPB") and the State of New York. The CFPB and the State of New York jointly filed a complaint alleging that Sterling’s practice of issuing store credit-cards resulted in a series of abuses that constituted numerous violations of both the Truth in Lending Act and the Consumer Financial Protection Act of 2010.
Sterling Jewelers and their subsidiaries are one of many corporations in the U.S. that offer in-store credit cards, extending lines of credit that are serviced by and used exclusively for the company that provided the card. In its complaint, the CFPB alleges that Sterling opened over 3-million of store card accounts per year from 2014 to 2017. These cards accounted for more that $300 million in net revenue for each of those years. In furtherance of opening such lucrative accounts, the complaint alleges that Sterling encouraged its employees to pursue enrolling customers in credit programs in ways that violated their consumer rights.
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About the CFPB Complaint
The complaint details a myriad of ways in which customers were misled into signing up for store credit cards, many of which were officially endorsed by Sterlings official employee training literature. The tactics used by Sterling employees were alleged to include:
Soliciting customer information by informing them that it was for a “rewards program”, and then completing a credit application with said information without consent. Occasionally the excuse of a survey was used rather than that of a rewards program.
Completing credit applications without ever displaying any portion to the consumer, leaving them unaware of any applicable terms and conditions. Oral disclosures of these terms were alleged to be in many cases either incorrect or nonexistent.
Misleading consumers as to the sort financing they were applying for and what the interest rate and monthly payments for said financing would be. This included the promotion of “interest-free financing”, which was available under certain circumstances that many applicants were not aware of and did not meet the requirements for.
Payment Protection Plan
In addition to the alleged violations in signing up consumers for cards, the complaint also alleges that Sterling abused the application of ts optional credit insurance “Payment Protection Plan”. These alleged discrepancies included but were not limited to:
Enrolling customers in the PPP insurance without their knowledge or consent or adding it to customer’s billing statements without their knowledge or consent.
Promising to cancel PPP insurance before the customer was charged so that a sign-up quota could be met, then failing to cancel the insurance.
Informing customers that they were signing up to received an informational packet about PPP insurance, when in fact they were signing up for PPP insurance itself.
Why did Sterling do it? What's the punishment?
The complaint alleges that a majority of the above behavior was incentivized by the creation of credit card sign-up quotas for employees. Failure to meet performance standards with respect to credit card sign ups resulted in disciplinary action or termination. In addition, some managerial bonuses were assigned in accordance with the number of credit card sign ups generated.
In light of these allegations, Sterling Jewelers elected to enter into a Stipulated Final Judgement and Order. In addition to strictly prohibiting the misleading practice mentioned above, the Order also outlines monetary provisions to be paid to the CFPB and the State of New York. As per the Order, Sterling must pay the bureau $10 million, with an additional $1 million due to New York State.
As is customary, the Order includes a number of Compliance Provisions. These provisions outline certain requirements for Sterling’s record keeping, requires the distribution of the order to managerial staff, and ultimately serves to ensure that prior improprieties do not occur again.
Consumer Protection
It's important to understand that consumers in New York are afforded vast protection from deceptive practices relating to credit cards under both federal laws and New York General Business Law. The attorneys at the Law Office of Simon Goldenberg PLLC are adamant about protecting our clients' consumer rights and fighting to obtain compensation where appropriate.