CFPB and New York Enter Into Consent Order over Credit Card Practices

On January 16, 2019, the Consumer Financial Protection Bureau (“CFPB”) and the Attorney General for the State of New York announced a consent order with Sterling Jewelers, Inc. (“Sterling”) related to Sterling’s credit card practices.

The consent order alleges that Sterling employees indicated they were either checking to see how much credit the consumer would qualify for or that the consumers were completing a survey or enrolling in a rewards program, when, in reality, Sterling was completing credit card applications for consumers without their knowledge or consent. The CFPB and New York characterized this conduct as a deceptive act or practice in violation of the Consumer Financial Protection Act of 2010 (“CFPA”). The CFPB and New York also alleged that this conduct violated the Truth in Lending Act’s prohibition against issuing a credit card except in response to an oral or written request or application.

The CFPB and New York also cited Sterling for violations of the CFPA related to alleged misrepresentations regarding certain financing terms, including the applicable interest rate, monthly payment amount, and eligibility for promotional financing. Finally, the CFPB and New York alleged that Sterling engaged in unfair acts or practices by enrolling consumers in optional payment protection plan insurance without informing consumers that they were being enrolled or by misleading consumers as to the product for which they were signing up.

Under the terms of the consent order, in addition to injunctive relief, Sterling is required to pay a $10 million civil money penalty to the CFPB and a $1 million civil money penalty to the State of New York.

While the CFPB has adopted a more business friendly approach since Director Richard Cordray’s resignation, this consent order illustrates the CFPB’s willingness to use the CFPA to pursue penalties related to conduct that it deems to be unfair or deceptive.

Credit card issuers would be wise to carefully review account opening practices to identify potential unfair, deceptive, or abusive conduct.