Credit card firm to pay $1m in restitution
ALBANY, N.Y. -- A Georgia credit card company has agreed to pay $11 million in restitution to New Yorkers to settle Attorney General Eliot Spitzer's investigation into its practices.
Columbus Bank and Trust Co. and CompuCredit Corp., a marketing and collection company, agreed to reform practices for sub-prime credit cards held by 60,000 New Yorkers, Spitzer said. The cards are marketed to consumers with lower incomes or credit problems who are willing to pay higher rates and fees to secure credit cards.
Spitzer had accused the company of failing to disclose activation charges of as much as $179 on Columbus Bank's Aspire Visa cards, which were marketed to low-income people and consumers with poor credit.
He also said the company exaggerated how much credit would be provided, enrolled customers in other programs without consent, and then billed them with renewal fees. Spitzer also criticized the debt-collection practices.
There was no immediate comment from the companies about last week's settlement. Spitzer said the companies cooperated in the investigation.
Emily Morin, a retiree from Buffalo, was one of the people upset with the Aspire Visa card.
``They sent me several letters promising no annual fee, no this, no that," she said.
Instead, she said, an annual fee of $85 was billed to her, and it took letters from her and from the attorney general's office to remove it. Last month, however, the fee returned. The company has since removed it.
Under one offering called ``Little Rock," a customer would get a $300 line of credit but immediately would be hit with a $179 activation fee, according to Spitzer's complaint. Customers also would face a $29 accounting opening fee and a $150 annual fee.
Collection practices included several calls a day to consumers, calls at work, and calls to neighbors, according to the complaint.
New Yorkers will receive compensation for activation fees and the cost of third-party membership clubs.
The company also will pay $525,000 to the state in civil penalties and costs.
``This agreement sets a new standard in the way subprime credit cards are marketed and collected and reflects the state's ongoing commitment to protect those most vulnerable to fraud and deception," Spitzer said.
Aspire Visa cardholders with questions about restitution can call the attorney general's office at 518-474-5481.
In January, Cross Country Bank, another sub-prime credit card provider, was ordered by a state court to pay $10 million for its practices that Spitzer argued trapped vulnerable consumers in growing debt.
