Class Action Lawsuits Filed Against Credit Card Companies (continued)
Providian -- The king of unscrupulous billing practices and immoral behavior, Providian was considered to be the baddest of the bad boy credit card companies because of its practices and the fact that it mainly serviced low income people with very bad credit. Around the year 2000, the Attorney General of California began receiving hundreds of complaints from California citizens and ordered an audit of Providian's records. The auditors discovered that Providian was overbilling its customers, assessing bogus late charges, and signing customers up for credit insurance without their permission. The California Attorney General sued Providian and won a $300 million judgment and used the fund to payback Providian's customers. Thousands of people around America received checks from the California Attorney General for as much as $200.00 as a refund for Providian's billing overcharges. (Note: Providian was sold to Washington Mutual in 2005. In 2008, Washington Mutual collapsed during the Great Recession and its assets were sold to JP Morgan Chase.)
Advanta -- Settled a class action lawsuit by agreeing to pay $7.2 million to reimburse customers who were guaranteed a low rate, but were charged a higher rate. Note: In June 2009, Advanta discontinued its credit card business in an attempt to save it from bankruptcy.
Sears -- Paid $36 million to settle a lawsuit filed by customers who claimed their interest rates were raised after Sears promised it would not raise them. Most consumers don't realize that retail stores like Sears, Target, JC Penney and the like profit BIG on their in-store credit cards, often charging huge interest rates as high as 29% but often averaging between 20 and 22 percent. The interest they earn off of customers carrying big balances month-to-month is a significant part of their annual earnings.
Citibank -- In September 2010, Citibank settled a class action lawsuit for $10 million as a result of being accused of improperly assessing late fees on delinquent customers. Anyone who had a Citibank credit card between May 5, 2002 and May 24, 2010 might have received a check for as much as $18 as a refund. Many years ago Citibank paid another $45 million settlement for improperly assessing late fees. Neither of these lawsuits are surprising since Citibank has a record of dubious practices against their customers and have been sued hundreds of times as a result. Before the Card Act passed in 2009 outlawed many abusive practices, Citibank was notorious for routinely checking their customers credit reports and, if they found anything negative at all, would raise the interest rate on a customer's credit card account from a low of 7 percent to as much as 28 percent, forcing many customers to default on their accounts because they couldn't make the new minimum monthly payment. This, in effect, made them slaves to Citibank, never being able to pay off the credit card account. And Citibank wouldn't reverse their decision even if the customer could prove that the information on the credit report was an error or in accurate. There are several class action lawsuits currently pending against Citibank as of May 2012 when this is being written. One rather humourous recent lawsuit alleges Citibank sent some of their customers who earned frequent flier miles 1099 forms with Citibank treating the frequent flier miles as earned income.
MBNA -- MBNA was once the largest issuer of credit cards on the planet Earth. They specialized in marketing affinity cards to associations, college students and the like. Customers could get a credit card with their college sports team, club, group or association logo on it. Their credit cards usually had some of the highest interest rates out there. Many lawsuits were filed against them for their abusive practices, but one of the last ones resulted in MBNA agreeing to an $8 million settlement for improperly assessing credit card late fees. MNBA no longer exists under the MBNA name. In 2005, Bank of America began the acquisition process, offering about $35 billion for MBNA's assets. Bank of America completed its acquisition of MBNA in 2009.
It is important to point out that consumers who participate in these class action lawsuits rarely see any money from them. Most of the settlement goes to the law firms filing the class action lawsuits. One good example of this occurred about ten years ago when JP Morgan Chase settled a class action lawsuit for $22 million for its dubious billing practices, but each plaintiff in that particular class action lawsuit only received a check for ten cents. Yes, that isn't a misprint; they received only ten cents each. The law firm filing the class action took a big chunk of the settlement as its fee, but before you label these lawfirms as "greedy", keep in mind that they do all their work on a contingency basis and these lawsuits can go on for several years with the law firm receiving no payment. And the firms that file these class action lawsuits do stop many abusive credit card practices. Yes, these attorneys are wealthy as a result of filing these class action lawsuits, but they do protect consumers at the end of the day. If these firms never filed class action lawsuits against the big financial institutions, the average American consumer would be significantly worse off than they are now and would be saddled with all sorts of abusive practices, paying outrageous fees for everything associated with banking.
The class action lawsuits mentioned in this article are by no means a complete list of class action lawsuits filed against big credit card companies. At any given time, all of the major banks have hundreds of lawsuits pending against them for all types of violations, from credit card abuses to mortgage fraud to securities violations. The odd thing is is that they never seem to learn their lesson and are content to spend millions defending these lawsuits. Several banking regulators stated it best: "Most credit card companies use sneaky tactics, but only a few are singled out for punishment."
Credit Cards
Class Action Lawsuits Against Major Credit Card Issuers
