Banking companies to pay State nearly $4M to settle lawsuits

CHARLESTON - State Attorney General Patrick Morrisey said Nov. 19 Discover Financial Services and HSBC Finance Corporation will pay the state $1.95 million each, or $3.9 million total, to settle lawsuits alleging the companies’ credit card protection programs violated state law.

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

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

The two financial institutions, and their subsidies, were parties in that case.

“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 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 typically 89 cents per $100 credit card balance and collectively netted millions of dollars for the banks over a period of several years.

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 denied the allegations.

In September, Bank of America Corp., JPMorgan Chase & Co., Citibank/Citigroup Inc. and GE Money Bank settled with Morrisey’s office -- also for $1.95 million each.

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.

The final attorney fees must be approved by the court.

However, the firms have agreed to be compensated under the new outside counsel policy established by Morrisey’s office earlier this year, which pays firms on a sliding scale based on the amount of the verdict or settlement rather than a flat one-third fee.

The attorney general noted that the policy has saved the state more than $325,000 on such cases alone, and collectively has saved about $1 million.

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.