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State Suing 7 Credit Card Companies Over Fraudulent Payment Protection Plans

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Posted: Apr 12, 2012 12:39 PM HST Updated: Apr 12, 2012 5:46 PM HST
By Keoki Kerr

State suing 7 credit card companies over fraudulent plans
Credit Card

HONOLULU (Hawaii News Now) – The state Attorney General sued seven of the country’s largest credit card companies Thursday, claiming they’re charging thousands of Hawaii customers for payment protection plans they don’t want and often don’t even know about.

The AG estimates more than 30,000 people in Hawaii pay a monthly fee that’s supposed to ensure their credit card company will delay or cover their payments if they lose their job or are injured and unable to work.

David Louie

“There has been a history of improper and inappropriate practices that are unfair and deceptive trade practices,” said David Louie, Hawaii’s Attorney General.

The lawsuits are against credit card companies Bank of America, Barclays, Capital One, Chase, Citi, Discover and HSBC

Louie accused the companies of using telemarketers in a practice called “slamming,” or tricking customers to commit to signing up for payment protection.

“That’s where somebody deceptively asks you to enroll, but not really enroll, so you don’t know that you’re enrolling, by they say, ‘Oh, you just enrolled,'” Louie told a news conference in his office Thursday morning.

Rick Fried

In many cases, he said credit cardholders don’t notice, because the charges are often just one percent of their monthly credit card bills.

“Because there are small charges, they’re on a monthly basis, they’re on a recurring basis and a lot of people don’t check,” Louie added.

What’s worse, Honolulu attorney Rick Fried, who’s representing the state in the case, said payment protection plans don’t apply to people who work part-time, are employed by members of their family, the unemployed or retirees.


“It almost doesn’t ever apply. It’s really an unbelievable practice,” Fried said. “They’re actually preying on probably the people that are most concerned about their financial status, who would be most likely to sign up. So they’re tailoring this toward the very people who they know they won’t have to pay.”

But Fried said the companies keep collecting the money even from customers who are ineligible for coverage.

“Spending their money for something, in most cases, they didn’t want, and they don’t even know they are getting charged for,” Fried said.

The state said the companies are liable for millions of dollars in penalties in Hawaii. If the state is successful, those winnings will end up in the state general fund and some could be paid in restitution to customers in the islands who were bilked out of their money.

Hawaii residents who believe they’ve been bilked by credit card companies for protection plans can call the Attorney General’s office at 808-586-1500 or Fried’s law firm at 808-524-1433 for more information on the case, or to provide lawyers with details of their experiences.

Fried’s Honolulu firm, as well as two mainland firms experienced in litigation against credit card companies, Golomb and Honik of Philadelphia and Baron and Budd of Dallas, are representing the state in the lawsuits.

The firms will be paid a contingency fee on a sliding scale, depending on how much money is obtained from the credit card companies, after deducting costs and expenses, said state AG spokesman Joshua Wisch.

If the state wins up to $5 million, the firms will be paid 23 percent, with state taxpayers getting the remainder, Wisch said. If the state gets between $5 and $10 million, the law firms will earn 20 percent of that as a fee, according to their agreement with the AG’s office. The firms’ payments will be 17 percent if the state wins $10 to $25 million. And the firms will be paid 14 percent if the state ends up with $25 million or more after the lawsuits are settled or decided in court, Wisch said.