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Discover to Refund Cardholders for Payment Protection Fees

As part of a settlement with the FDIC and the Consumer Financial Protection Bureau, Discover is required to refund about $200 million to cardholders who enrolled in credit protection plans by phone.

Payment protection plans charge a small monthly fee, sometimes a percentage of your credit card balance, and promises to cover your minimum payment if you lose your job or become unemployed. You could go months or years, pay hundreds or thousands of dollars, without ever needing the service. Or, you could pay thousands of dollars toward the insurance only to be denied when you try to receive the benefit.

The Discover payment protection settlement agreement comes just a couple of months after Capital One reached a similar agreement to refund $140 million to cardholders. In addition, Discover is required to pay $14 million civil penalty that the FDIC and CFPB will split.

In Capital One’s case, the company had to pay up because many cardholders said they were led to believe the services were required or that the services were free.

Capital One and Bank of America have since stopped offering credit card protection. According to the Wall Street Journal, Citigroup has put a hold on telephone sales of these services while the company reviews its practices. Chase has stopped offering credit card protection to new customers, but will continue offering the service for customers who have already enrolled.

Discover and other major credit card issuers could also cancel payment protection services since the CFPB is paying closer attention to these types of services and how they’re marketed. The CFPB is probing into the marketing of all credit card add-on services including identity theft and credit score monitoring. The bureau wants to confirm that credit card companies’ marketing tactics follow consumer financial law, specifically that the products are not marketed deceptively and terms and conditions are made clear.

The loss of credit card protection plans won’t necessarily hurt consumers. The service is automatically billed to your credit card each month making it more difficult to pay off your balance if you don’t increase your monthly payment to cover the insurance fee.

If you’ve been tricked into signing up for one of these services or you were not allowed to cancel, you can file a complaint through ConsumerFinance.gov. The bureau may file a lawsuit against your card issuer if enough consumers complain about the same thing. In the event of a lawsuit settlement, you may be entitled to a full or partial refund of the fees paid toward a service.

There are currently no details about how eligible Discover cardholders will be refunded. If you believe you’re entitled to a refund, contact Discover using the number on the back of your credit card.

Source: FoxBusiness.com, ConsumerFinance.gov
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Thursday, 25 April 2019