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Comenity Bank, Comenity Capital Bank to return $61.5 million to consumers for deceptive practices for credit card add-on products

FDIC-Logo.svgThe Federal Deposit Insurance Corporation announced a settlement Tuesday with Comenity Bank and Comenity Capital Bank for deceptive practices related to the marketing and servicing of credit card "add-on products," in violation of federal consumer laws.

As part of the settlement, Comenity Bank will pay a penalty of $2 million and provide restitution of about $53 million to consumers. Comenity Capital Bank will pay a penalty of $450,000 and provide restitution of about $8.5 million to consumers.

The banks offer credit cards through retailers nationwide that are usually co-branded with the retailers. For these cards, the banks offer "Account Assure" and "Account Assure Pro," which are payment protection/debt cancellation add-on products to the credit cards.

The products allow consumers who enroll to request benefit payments for life events such as unemployment and disability.

The FDIC determined that the banks the violated the Federal Trade Commission Act by:

  • Representing to consumers that they wouldn’t be charged a fee for the products if their accounts had no balances, but fees were charged.
  • Making misrepresentations and omissions on the refund process for consumers' cancellations within the first 30 days of enrollment.
  • Making misrepresentations and omissions on the conditions for receiving gift cards or account statement credits offered as incentives for enrolling.

The FDIC orders require the banks to correct the violations of law, ensure future compliance with it, and develop and carry out a restitution plan for consumers impacted by the violations.

It requires restitution for violations that occurred between January 2008 and September 2014. Consumers who are eligible for relief under the settlement aren’t required to take any action to receive restitution.

Copyright 2015, Rita R. Robison, Consumer Specialist

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