Hawaii Takes on Banks for Slamming Elderly

HONOLULU (CN) - Hawaii's attorney general sued seven major banks, claiming they target elder credit cardholders, by "slamming" and other means, to sell them "virtually worthless" "payment protection" plans - even if the customers give banks "a clear rejection of the offer."

Attorney General David Louie filed separate complaints against these banking giants and their credit-card subsidiaries: Bank of America, Barclays, Capital One, Chase, Citi, Discover, and HSBC.

The state claims the banks use "highly misleading and telemarketing calls, forged or nonexistent mailers or online applications, or nothing at all" to bilk their victims. "In each instance, unknowing consumers are hit with monthly fees without their meaningful consent or understanding that their credit card will be charged for these products. Defendants are in a position to do this because, unlike a typical marketer or seller, they are already the consumer's credit card company and already have their credit card number."

The banks charge their victims for bogus "services" they call "'Payment Protection,' 'Emergency Payment,' 'Credit Inform,' 'Credit Inform Premier' and other monikers ... even though their status at time of enrollment prevents them from receiving benefits under the terms of these payment protection plans," the state says.

The attorney general said in a statement announcing the seven lawsuits: "The state has requested injunctive relief to stop the alleged illegal practices, full restitution for all affected consumers, and penalties, which could subject the credit card companies to up to $10,000 per violation. If awarded, restitution funds would go directly to consumers and penalties would go to the state's general fund."

Hawaii claims the banks target the most vulnerable, including the elderly and people with poor credit, for "fee-based products which are ancillary to their credit cards."

All quotations in this report come from the state's complaint against Capital One Bank and its affiliates, in Hawaii's First Circuit Court.

The state claims the banks use a welter of deceptive tactics, including "slamming" old people, to charge them for worthless services.

"Defendants utilize the card activation process as another way to wrongfully enroll consumers," the complaint states. "Consumers are told they must call defendants from their home phone number to activate their card. Defendants take this opportunity to sell ancillary products. Cardholders who are calling to activate a credit card are particularly susceptible to believing that the 'disclosure' is some legal text that must be read to the cardholder, rather than an alleged contractual agreement to purchase an optional, ancillary product of little or no value to them. Many Hawaii cardholders, accustomed to all the legal language and fine print received when they open a new credit card account, become immune to the terms and conditions communicated to them. They reflexively reply 'OK,' and have no idea that they have supposedly purchased some ancillary product.

"In addition to deceptively inducing cardholders to say 'yes' or 'OK' during the call, defendants enroll come cardholders who did not provide any affirmative response. In such instances, defendants have no proof of affirmative assent, either because there is no affirmative response on the recording, there is a clear rejection of the offer, or a record of the call does not exist. The cardholder has been 'slammed,' that is, involuntarily enrolled in the plan without their knowledge or consent."

What's more, the complaint states: "Defendants' ancillary products are in fact a dense maze of limitations, exclusions and restrictions, making it impossible for consumers to knowingly determine what these products cover and whether they provide a worthwhile financial benefit."

Benefits are limited for disabled people, but the defendants do not even ask customers if they are disabled, the attorney general says.

These "confusing and misleading" tricks provide "the added benefit to defendants of lowering available credit to its subscribers because the imposition of this additional fee brings consumers closer to their maximum credit limit without their knowledge. This operates in some instances to cause consumers to exceed their credit limits, thereby incurring over-the-limit fees. Further, the imposition of the payment protection fee creates a cycle of profitability, in that the fee itself increases subscribers' monthly credit balances, which in turn increases payment protection fees in subsequent months."

And, the complaint continues, "Defendants' 'customer service' support is set up in such a way that Hawaii consumers cannot easily cancel ancillary products or receive answers to benefit questions, nor can they easily file claims or receive benefits for filed claims."

The attorney general says: "(A)s a result of these unfair and deceptive practices, defendants have amassed substantial sums of money with virtually no benefit to Hawaii citizens who are nevertheless charged for these products month in and month out."

The state seeks disgorgement, injunctions, and penalties for unfair and deceptive trade, consumer fraud, consumer fraud against elders and unjust enrichment.

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