Four banks settle with AG's office, will pay $2M each

CHARLESTON - State Attorney General Patrick Morrisey announced Sept. 24 that four large banking companies will pay the state $1.95 million each - $7.8 million total - to settle lawsuits over their credit card protection programs.

Former Attorney General Darrell McGraw alleged that the banks’ programs violated West Virginia law. Morrisey inherited the suits, filed in Mason County Circuit Court, after his win in the 2012 election.

The settlements were reached three months after the state’s high court ruled in State ex rel. Discover Financial Services Inc. vs. Nibert.

In Discover, the court ruled that the Attorney General’s Office had the authority to use special assistant attorneys general in certain cases.

The four settling financial institutions - Bank of America Corp., JP Morgan Chase & Co., Citibank/Citigroup Inc. and GE Money Bank - were parties in that case.

“This office worked long and hard in the Discover case to protect West Virginia consumers. But for that case, we would have never reached a settlement in this matter,” Morrisey said in a statement.

According to the complaint filed by the Attorney General’s Office, the banks engaged in misleading and deceptive tactics to enroll customers in payment protection programs, which involved fees of 89 cents per $100 credit card balance and netted millions of dollars for the banks over a period of several years.

“Over a number of years, thousands of West Virginians entered into credit card payment protection programs without knowing they had done so, were charged extra fees and then had trouble reaping the benefits,” Morrisey said.

According to the complaint, bank representatives would ask new card holders whether they were interested in entering a program that would cover minimum monthly payments in the event of a major life change, such as loss of income, spouse or other event.

If the cardholder even expressed “interest,” he or she was automatically enrolled in the program without being given an ability to review the terms and conditions of the program, including the fee structure, what the program would offer and how benefits would be determined.

The banks have denied the allegations.

“Our office will always be aggressive in fighting back against companies that engage in schemes to mislead consumers or knowingly omit facts that would help consumers make the best decisions with their finances,” the attorney general said.

Morrisey said his office did not settle with Discover Financial Services, HSBC Card Services or World Financial Network Bank. Claims against those institutions will continue, he said.

The state was represented in the case by the Charleston-based firms of Bucci Bailey & Javins LC and Druckman & Estep. Baron & Budd PC in Dallas also worked on the case.

Attorneys are expected to collect roughly $1.95 million in fees and costs, according to Morrisey’s office.

While the final attorney fees must be approved by the court, outside counsel firms have agreed to be compensated under the new outside counsel policy established by the attorney general earlier this year.

The policy’s new payment structure is expected to save the state about $650,000 on these cases alone, Morrisey noted.

“Our outside counsel policy already is saving the state a tremendous amount of money,” he said. “This ethics reform ensures that taxpayers are getting a bang for their buck when outside counsel firms are utilized for consumer protection cases.”

Under the terms of the settlement and the office’s agreement with the governor and the state Legislature, the settlement monies will help ensure the Consumer Protection Division has three years of operating revenue.

The rest will be turned over to the Legislature, Morrisey said.

In an opinion released June 4 and authored by Justice Robin Davis, the unanimous court ruled the defendants in the lawsuits have not alleged any conduct that has resulted in an injury.

“The briefs set out a plethora of allegations that involve remotely possible harmful conduct,” Davis wrote.

“We have not and will not interfere with or disqualify a party’s counsel merely because of allegations of improper conduct that has not occurred.

“To allow a mere possibility of improper injurious conduct to be the standard for disqualification would result in parties constantly seeking to disqualify opposing counsel because of phantom injuries. The law of disqualification cannot rest on the imagination of opposing counsel.”