CHICAGO (CN) - Compucredit charged credit-card customers a $100 annual fee for a credit line of $850, then killed its subprime credit program a month later, according to a class action in Cook County Court. The class claims Compucredit killed its cards after Congress enacted the CARD Act, which restricts such "fee harvester" programs.
The class claims Compucredit sold it "Tribute" cards and "other 'subprime' credit cards with high fees," for $100 a year plus a $10 monthly "maintenance fee" for a credit card with an $850 limit. (The sum comes to 25.8 percent of the credit limit in fees.)
The CARD Act, passed by Congress in March, bans unfair rate increases and fee traps, including outrageous fees for "low-limit" subprime cards.
Compucredit knew at the time that it had to discontinue the "Tribute" credit card program and any similar programs, the class claims. But it charged the annual fee anyway, knowing that it would kill its "Tribute" program, the class claims.
Named plaintiff Deborah Davis says she was charged a $100 annual fee and a $10 monthly fee on her Tribute card on Aug. 10. On Sept. 11 she got a letter from Compucredit stating that it had terminated the program and closed her account. But it said she still be responsible for account maintenance fees. Davis says Compucredit refused refund her annual fee.
She says that if class members do not pay the unfair fees, their credit scores will suffer, which will "defeat the intended purpose of the cards."
She wants restitution, damages for breach of contract and fraud, and wants Compucredit enjoined from assessing any more fees.
Lead counsel is Daniel Edelman with Edelman, Combs, Latturner & Goodwin.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.