Attorney General Morrisey Announces Nearly $8 Million In Settlements In Payment Protection Lawsuit
CHARLESTON - West Virginia Attorney General Patrick Morrisey today announced that four large banking companies will pay the state $1.95 million each (or $7.8 million total) to settle lawsuits alleging the companies’ credit card protection programs violated West Virginia law.
The settlements were reached three months after the West Virginia Supreme Court of Appeals ruled in the case State ex rel. Discover Financial Services, Inc. vs. Neibert that the Office of the Attorney General had the authority to use special assistant attorneys general in certain cases. The four financial institutions - Bank of America Corp., JP Morgan Chase & Co., Citibank/Citigroup Inc., and GE Money Bank - were parties in that case.
“This Office worked long and hard in the Discover case to protect West Virginia consumers. But for that case, we would have never reached a settlement in this matter,” Attorney General Morrisey said. “Over a number of years, 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. Our Office is committed to ensuring businesses, no matter how large or small, do not take advantage of our citizens or violate the laws.”
According to the complaint filed by the Office, the banks engaged in misleading and deceptive tactics to enroll customers in payment protection programs, which involved fees of typically 89 cents per $100 credit card balance and collectively netted millions of dollars for the banks over a period of several years.
The complaint said bank representatives would ask new card holders whether they were interested in entering a program that would cover minimum monthly payments in the event of a major life change, such as loss of income, spouse or other event. If the cardholder even expressed “interest,” he or she was automatically enrolled in the program without being given an ability to review the terms and conditions of the program, including the fee structure, what the program would offer and how benefits would be determined. The banks denied the allegations.
“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.
The office did not settle with Discover Financial Services, HSBC Card Services or World Financial Network Bank. Claims against those institutions will continue.
The State was represented in the case by the Charleston-based firms of Bucci, Bailey & Javins LC and the Law Offices of Druckman & Estep. The firm of Baron & Budd PC in Dallas, Texas, also worked on the case.
Attorneys are expected to collect roughly $1.95 million in fees and costs. While the final attorney fees must be approved by the court, outside counsel firms have agreed to be compensated under the new outside counsel policy established by the Office earlier this year. The policy’s new payment structure is expected to save the state approximately $650,000 on these cases alone.
“Our outside counsel policy already is saving the state a tremendous amount of money,” Morrisey said. “This ethics reform ensures that taxpayers are getting a bang for their buck when outside counsel firms are utilized for consumer protection cases.”
Under the terms of the settlement and the Office’s agreement with the Governor and the Legislature, the settlement monies will help ensure the Consumer Protection Division has three years of operating revenue; the remainder will be returned to the Legislature.