Discover, Capital One And HSBC Will Pay $2.2M Over Protection Plans

Discover, Capital One and HSBC will pay a total of $2.2 million to settle charges that they misleadingly sold credit-card payment protection plans in Missouri, the state’s Attorney General announced.

Under the terms of the settlements, Discover will pay $760,000, Capital One will pay $740,000, and HSBC will pay $825,000 to Missouri’s Merchandising Practices Revolving Fund, which funds consumer-protection education and enforcement, Attorney General Chris Koster said. In addition, all three companies are prohibited from selling payment-protection products and related add-on products, such as identity-theft protection, in a way that misleads consumers. However, the companies settled without admitting fault.

Koster’s investigators found consumers were led to believe that, for a monthly fee, their credit card payments could be suspended if they became unemployed or disabled. However, after making monthly protection plan payments, consumers who attempted to make claims were often told they did not qualify for the benefit.

In addition, the monthly protection plan fee was added to the consumer’s credit-card balance, reducing the amount of the consumer’s available credit by the amount of the fee. Even when card issuers agreed to waive minimum payments during a hardship, the consumer’s balance often increased due to charged interest and fees, including the continuing payment-protection plan fee.

Investigators said some consumers were unaware they were signed up for a payment-protection plan or other add-on product, while others were misleadingly upsold after calling their card issuer on another matter or solicited directly by telemarketers. Consumers were also automatically enrolled if they failed to read and respond to a notice sent by mail.

“Many Missouri consumers paid hundreds of dollars for add-on protections and never received any benefit,” said Koster. “These products were aggressively marketed with obscure terms and conditions, which enabled these companies to reap a financial benefit at their customers’ expense.”

Both Discover and Capital One have been hit before for marketing tactics related to credit card add-on services. In 2012, they ran afoul of the FDIC and the Consumer Financial Protection Bureau for practices similar to the ones just settled in Missouri. In July 2012, Capital One agreed to pay $210 million in cardholder refunds and regulatory fines, and in September 2012, Discover paid a $14 million fine and refunded $200 million to customers.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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