April 23, 2012

AG: Banks ‘slamming’ customers with fees

Attorney General Gary King is accusing eight of the nation’s largest banks of deceptive marketing of protection plans for credit-card holders — a practice known as “slamming.”

Eight separate civil lawsuits filed in state District Court this week say the banks violated the New Mexico Unfair Practices Act by charging credit-card customers about $100 a year for “ancillary products” that often were useless to them.

“This process is referred to as ‘slamming,’ ” the complaints state. “[The banks] are in a position to slam this customer because, unlike a typical marketer or seller, [the banks] are already the consumer’s credit card company and already have his or her credit card number(s) on file.”

The complaints say telemarketers call credit-card customers ostensibly to thank them and remind them of benefits they already have, then “speed through, skip altogether or alter the text of the information they are required to provide … to make these disclosures sound like confusing legalese. …

“These telemarketers conclude by saying ‘OK?’ or by asking if the person heard them or understood, knowing that such a question will almost always elicit an affirmative response such as `ok’ or `yes.’ Although the cardholder believes they have just listened to a courtesy call, [the banks] treat any affirmative response … as the cardholder’s agreement to enroll in the ancillary plan.”

The complaints say the customers later receive packets of information about the offer, but if they throw out the packet without signing it, reading it or further conferring with the bank, they nevertheless are enrolled.

Named as defendants are JPMorgan Chase & Co. Barclay’s Bank of Delaware, Capital One Bank, Bank of America Corp., City Group, GE Capital Retail Bank and HSBC Bank Nevada.

The complaints are signed by Assistant Attorney General Scott Fuqua; Turner W. Branch, one of Albuquerque’s most successful private attorneys, and Allen Carney, a Little Rock, Ark., lawyer who is spearheading the effort.

The ancillary products are called “payment promoter,” “account protection plan,” “class payment advantage,” “account security plan,” “total protection plan,” “account ease,” “identity theft protection” and “extended warranty.”

The complaints say no effort is made to determine if the consumers are eligible for the benefits associated with these plans. For example, elderly customers are often targeted for “payment protection plans” that propose to suspend payment obligations if a customer loses his job, even though elderly customers on fixed incomes are ineligible for these benefits.

Similar exclusions for disabled people, part-time workers, seasonal employees and workers concluding employment contracts, including those ending a military tour of duty, also are not explained, and the banks make no effort to investigate whether the customers meet these criteria, say the complaints.

The complaints ask a judge to enjoin the banks from “engaging in unfair or deceptive practices and unconscionable conduct,” to forbid the banks’ employees or agents from leaving New Mexico or removing property from the state, to declare that each act described in the complaints constitutes a separate violation of state law and to impose civil penalties of up to $5,000 per act. The state also asks to be granted the cost of the investigation, attorneys’ fees, post-judgment interest and other relief.

Assistant Attorney General Fuqua said through a spokeswoman that Branch’s and Carey’s law firms were engaged via a “small dollar contract ($5,000) … [to] negotiate potential settlements with these banks.”

The complaints say payment protection plans have come under scrutiny by the federal government as well as litigation from state attorneys general and the general public.

But Suzanne Ryan, a spokeswoman for JPMorgan Chase’s Western region in Southern California, denied there had been similar lawsuits filed in other states. She declined comment on the New Mexico lawsuit.