Attorney General Morrisey Announces Nearly $4 Million In Settlements In Payment Protection Lawsuit
CHARLESTON — West Virginia Attorney General Patrick Morrisey today announced that Discover Financial Services and HSBC Finance Corporation will pay the state $1.95 million each (or $3.90 million total) to settle lawsuits alleging the companies’ credit card protection programs violated West Virginia law.
The settlements were reached several 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 two financial institutions, and their subsidies, 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 allegedly 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 always will 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.
Today’s announcement follows an announcement in September that the Office settled with four other financial institutions — Bank of America Corp., JP Morgan Chase & Co., Citibank/ Citigroup Inc., and GE Money Bank. Those banks also each settled for $1.95 million.
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.
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, which compensates firms on a sliding scale based on the amount of the verdict or settlement rather than a flat one-third fee.
“Our outside counsel policy saved the State more than $325,000 on these cases alone, and since being implemented this summer, it already has collectively saved approximately $1 million,” 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.