Learn what the following Discover Bank lawsuits could mean for you.
Known primarily as a company that manages credit card accounts, Discover Bank is a versatile financial services company that also handles customer checking and savings accounts. The international banking company operates a lending division that oversees the administration of student, personal, and home equity loans. As the third largest credit card company in the United States, Discover Bank manages the Diners Club International credit card brand. Operating out of its Riverwoods, Illinois headquarters, Chicago area Discover Bank has more than 50 million credit cardholders signed up throughout the world.
Competing with the likes of Visa, MasterCard, and America Express has led to some questionable business decisions for Discover Bank, some of which have landed the financial services company in hot legal water. The company has entered into several class action lawsuits that range from defrauding credit cardholders to violating a federal anti-robocalling statute.
Let’s take a look some of the most prominent lawsuits against them.
Class Action Lawsuit Alleged Robocalling Tactics
Written into federal law by the United States Congress in 1991, the Telephone Consumer Protection Act (TCPA) represents a landmark consumer protection laws that prohibits companies from using automated telephone messaging systems to contact consumers to promote products and services. The TCPA also restricts how companies can make telemarketing phone calls. As Discover Bank discovered, enforcement of the FDCPA became one of the focal points for federal regulators at the start of the new millennium.
Filed by a Texas woman in a Chicago federal court, the lawsuit alleged Discover Bank mistakenly contacted the woman, when the company was actually trying to reach another person. Before the 2018 lawsuit, Discover had paid out more than $13 million to settle two similar class action lawsuit cases involving the placement of automated phone calls to consumers. The TCPA fines companies $500 for every unsolicited phone call, as well as $1,500 for intentional violations of the landmark consumer protection law.
Violations of the Fair Credit Reporting Act
To protect consumers against deceptive credit reporting practices, the United States Congress enacted the Fair Credit Reporting Act (FCRA). The FCPA contains a clearly written provision that forbids credit card companies from reporting private credit card account information to unauthorized companies and organizations. In 1977, Congress passed the Fair Debt Collection Practices Act (FDCPA), which bans credit card companies from reporting false consumer credit information to each of the three major credit reporting bureaus.
In 2017, lead plaintiff Sasha Rizzo alleged in a class action lawsuit that Discover Bank published her credit score in a document that was presented during a circuit court hearing. Rizzo also alleged that the Kohn Law firm, which represented Discover Bank at the time, attached her credit report to a document sent to the financial services company.
Rizzo stated in a court document that Kohn Law Firm came after her for an outstanding Discover credit card account by filing a lawsuit against her in state court. The law firm revealed Rizzo’s credit score, which the lead plaintiff claimed was a clear violation of the FCRA. “Discover is one of the largest banks in the United States, offering a variety of financial services to consumers in numerous states,” the class action lawsuit stated. “Wisconsin consumers may have, at one time or another, defaulted on Discover card obligations. Defendant law firm conducts debt collection activities throughout the state of Wisconsin and has filed collection actions against consumers on behalf of defendant Discover. Defendants routinely filed collection actions in the State of Wisconsin and attach to those suits the consumer reports/credit scores.”
Rizzo claimed the invasion of privacy caused her and the other plaintiffs involved in the class action lawsuit pain and suffering. The class action lawsuit sought monetary damages, as well as injunctive relief that forced Discover Bank to stop revealing sensitive consumer credit information.
Discover Customers Receive $214 Refund
In one of the largest and most publicized cases involving a class action lawsuit filed against a credit card company, a 2012 case led to Discover Bank refunding more than $214 million to nearly 3.5 million customers. The class action lawsuit claimed Discover Bank deceived customers into buying costly and unnecessary credit card products. Plaintiffs that filed the class action lawsuit alleged discover Bank enrolled them in payment protection programs and other expensive credit card programs, without first gaining their consent.
Discover Bank allegedly gave scripts to its call center representatives that stated customers would not receive any charges on their monthly statements until they had read and approved the content within the written materials. Documents associated with the class action lawsuit said that Discover Bank call center representatives “failed to disclose material terms and conditions” of payment protection products and “spoke more rapidly during the mandatory disclosure portion of the sales call.”
In addition to the more than $214 refund, Discover Bank had to pay a civil fine exceeding $7 million to both the Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC). “People deserve to be treated fairly by their financial institutions,” CFPB director Richard Cordray said. “We will continue to work toward that goal with great determination.”
Sued Because of Fraudulent Credit Card Agreements
Allegations of violating the Racketeer Influenced and Corruptions Act (RICO) is a serious charge. Discover Bank faced RICO charges in 2012 because of a class action lawsuit filed by lead plaintiff, Diana Elinich. In the class action lawsuit, Elinich claimed Discover Bank fraudulently stated Elinich violated a credit card agreement that she signed in 2011, when in fact, she signed a credit card agreement with Discover Bank back in 1999. “The 2011 cardmember agreement is not an amendment or a modification, but an original customer agreement,” the complaint argued. “It is clearly impossible for a contract dated after the date of the credit card issuance to act as the governing agreement between the parties.”
What appeared to be a clear cut mistake became a legal nightmare for Discover Bank, as the company ordered “all of their collection attorneys throughout the United States of America to use the false contracts as the governing contracts for credit card holder[s] who are the subject of collection efforts.” Elinich alleged in the complaint that Discover Bank conspired with debt collection agencies to use fraudulent documents to intimidate unsuspecting customers. The class action lawsuit sought damages for RICO violations, as well as violations of the FDCPA.
FDCPA and Class Action Lawsuits
As we move into the third decade of the new millennium, the FDCPA has moved into the legal spotlight when it concerns consumer protection law violations. Federal consumer protection agencies are looking into the relationships credit card companies like Discover Bank have developed with third party debt collectors.
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