Practice Areas

State Sues Credit Card Firms Over Bogus Fees

star adviser
POSTED: 01:30 a.m. HST, Apr 13, 2012 LAST UPDATED: 07:15 a.m. HST, Apr 13, 2012
StarAdvertiser.com

Companies bill customers for items that are neither requested nor needed
By Nelson Daranciang

David Louie The state attorney general filed unfair or deceptive practices lawsuits against seven major credit card companies in state court Thursday for allegedly assessing Hawaii cardholders charges for products the customers didn't request and that provide them no benefit.

The companies are Bank of America, Barclays, Capital One, Chase, Citi, Discover, HSBC and their subsidiaries.

The products are "payment protection" or something similar.

The companies assess the charges through a practice called "slamming," in which a telemarketer calls and asks the cardholder whether he or she is interested in receiving information about payment protection. If the cardholder says "yes," the company uses that response as an authorization to charge for the product.

Rick Fried, whose law firm is one of three handling the lawsuits for the state, said almost nobody gets any benefit from payment protection because of numerous complicated and changing fine-print restrictions. He said the telemarketers target people who would be most concerned about their ability to pay their credit card bills.

"And they specifically are charged with trying to get in touch with people who either don't qualify for age reasons or (are) not fully employed, as is required, or otherwise retired," Fried said.

He said the companies charge for payment protection regardless of the customer's qualification. And even if a customer is qualified, the benefit is merely a deferral of a payment, not the forgiveness or reduction of it.

Fried said the practice has been going on for years, and estimates about 30,000 Hawaii consumers are being charged for payment protection.

State Attorney General David Louie said the charge is easy for a cardholder to miss on a statement or ignore because it amounts to about 1 percent of a cardholder's bill. He said the state has so far received only a handful of complaints.

"What we're planning to do here is to get more information through these lawsuits and put a stop to these practices for the benefit of Hawaii consumers," Louie said.

The state, through the lawsuits, is seeking civil penalties from the companies ranging from $500 to $10,000 per violation under state law. Louie said any money collected from the companies, minus the contingency fees paid to the private law firms, will go into the state general fund.

Fried said consumers should be able to get their money back through class-action lawsuits filed on the mainland against the credit card companies and should have already received notice if there have been any settlements.

One of the two mainland law firms handling the lawsuits for the state, Golomb & Honik, advertises that it has secured more than $100 million in settlements against multiple credit card companies who deceptively marketed and sold payment protection coverages to their customers.