September 26, 2013

Four banks to pay state $8 million in credit lawsuit

CHARLESTON, W.Va. -- Four banking companies have agreed to pay the state nearly $8 million to settle a lawsuit claiming they used deceptive tactics to sell credit card protection programs to customers.

West Virginia Attorney General Patrick Morrisey announced Tuesday that Bank of America Corp., JP Morgan Chase & Co., Citibank/Citigroup Inc. and GE Money Bank agreed to pay $1.95 million each in the settlement.

Morrisey says thousands of West Virginians entered into credit card payment protection programs without knowing they had done so, were charged extra fees and then had trouble reaping the benefits.

In June, Morrisey's office announced a similar settlement with holding company United National Corp. and subsidiaries First Premier Bank and First Premier Bankcard. The companies agreed to pay a total $112,500 to the state.

The office has not settled a similar lawsuit against Discover Financial Services, HSBC Card Services or World Financial Network Bank. Claims against those institutions will continue, Morrisey said.

The lawsuits were filed in 2011, before Morrisey took office.

The lawsuit against the banks claimed that the companies' practices violated West Virginia's consumer protection laws by deceiving customers into signing up for the payment protection plans, which involved fees of 89 cents per $100 credit card balance. The state claimed the bank representatives would ask new cardholders whether they were interested in the program. If the cardholder expressed interest, he or she was automatically enrolled without being given the opportunity to review the terms and conditions of the program.

"Our Office will always be aggressive in fighting back against companies that engage in schemes to mislead consumers or knowingly omit facts that would help consumers make the best decisions with their finances,'' Morrisey said in a statement.

The banks denied the allegations, and they do not admit liability in the settlement agreement.

"We've worked cooperatively with the West Virginia Attorney General's Office to provide information about our program and we're glad that a resolution was reached,'' said Dori Abel, a spokeswoman for GE Money Bank. She added: "GE does not believe we violated consumer protection laws in West Virginia.''

The other banks involved told The Associated Press that they had either discontinued use of the protection programs or modified them.

While Morrisey's office filed the complaint, outside attorneys represented the state in the case. The outside attorneys are set to receive $1.95 million, pending a judge's approval.

The settlement proceeds will be used to operate the attorney general's Consumer Protection Division for three years, with the remainder returned to the Legislature, Morrisey said.