Discover Faces Enforcement Action From FDIC Over Fee Products

September 28, 2011
Dow Jones Newswires 
credit card news

The FDIC plans to issue an enforcement action against Discover Financial Services over its marketing of fee-based products, the company said in a regulatory filing Wednesday after market close. Discover's payment protection plan, also known as debt deferment, costs cardholders a fee of 89 cents per $100 in balances, allowing them to put monthly payments on hold in the event of job loss, hospitalization or other serious event. The company currently faces eight class action U.S. District Court cases stemming from the product. Discover says it entered a preliminary global settlement of all pending class action cases in June. U.S. consumers paid $2.4 billion in fees for payment protection plans on 24 million accounts in 2009, according to a March report from the Government Accountability Office based on data from nine credit-card issuers. "The products can protect a cardholder's credit rating in times of financial distress" but "can be difficult for consumers to understand," the GAO said.
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