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ENDING DECEPTIVE MARKETING PRACTICES

The Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) 

announced a joint public enforcement action with an order requiring Discover Bank to refund approximately 

$200 million to more than 3.5 million consumers and pay a $14 million civil money penalty. 

By the Numbers

 $200 million: The estimated total refund to Discover consumers.

 3.5 million: The approximate number of consumers receiving a refund.

 $14 million: The additional penalty that Discover will pay to the FDIC and the CFPB. 

Overview

The agencies jointly determined that Discover engaged in deceptive telemarketing practices to sell the 

company’s credit card add-on products. Payment Protection was marketed as a product that allows consumers

to put their payments on hold for up to two years in the event of unemployment, hospitalization, or other 

qualifying life events. Discover also sold its Credit Score Tracker, designed to allow a customer unlimited access 

to his or her credit reports and credit score. The third product was Identity Theft Protection, which was 

marketed as providing daily credit monitoring. Lastly, Discover’s Wallet Protection product was sold as a service 

to help a consumer cancel credit cards in the event that his or her wallet is stolen.

Discover’s telemarketing scripts contained misleading language likely to deceive consumers about whether they 

were actually purchasing a product. Discover’s telemarketers also often downplayed key terms and spoke 

quickly during the part of the call in which the prices and terms of the add-on products were disclosed. 

Deceptive Marketing Practices 

Because of the misleading language in the scripts and the actions of Discover’s telemarketers, consumers were:

 Misled about the fact that there was a charge for the products: Discover’s telemarketing scripts often used 

language implying that the products were additional free “benefits,” rather than products for which a fee 

would be applied to their accounts. 

 Misled about whether they had purchased the products: The telemarketing scripts frequently suggested 

that consumers would not be charged for the products until after having a chance to review printed 

materials from Discover. Discover, however, did not provide consumers with the information until after 

Discover had already initiated the consumer’s purchase of a product.

 Enrolled without their consent: Discover representatives processed the add-on product purchases without 

some consumers’ consent. These consumers were then charged for the product on their Discover card. 

 Withheld material information about eligibility requirements for certain benefits: Discover’s telemarketers 

typically did not disclose critical eligibility requirements for certain payment protection benefits, such as

exclusions for pre-existing medical conditions and certain limitations concerning employment.

FDIC-CFPB Enforcement Action

Under the order, Discover has agreed to:

 Stop deceptive marketing: Discover is required to institute certain changes to its telemarketing of these 

products that are designed to ensure that these unlawful acts do not occur again. Discover has also agreed 
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to submit a compliance plan to the FDIC and the CFPB for approval, and to take specific corrective actions 

related to the products. 

 Pay restitution to consumers who purchased the products: Discover will pay approximately $200 million in 

restitution to more than 3.5 million consumers who were charged for one or more of the products between 

December 1, 2007 and August 31, 2011. Generally, all consumers affected by Discover’s deceptive practices 

regarding these products, except those who affirmatively made use of Payment Protection, will receive 

restitution, with amounts varying depending on when they purchased, and how long they held, the add-on 

products. All consumers will receive at least 90 days’ worth of fees paid (minus any refunds they have 

already received), with approximately 2 million consumers receiving full restitution of all of the fees they 

paid (minus any refunds they have already received).

 Provide refunds or credits without any further action by consumers: Consumers are not required to take 

any action to receive their credit or check. If an affected consumer is still a Discover customer, he or she will 

receive a credit to his or her account. If an affected consumer is no longer a Discover credit card holder, the 

consumer will receive a check in the mail or have any outstanding balance reduced by the amount of the 

refund. 

 Submit to an independent audit: Compliance with the restitution terms of the order will be assured through 

the work of an independent auditor, who will report to the FDIC and the CFPB on Discover’s compliance with 

the joint FDIC-CFPB Consent Order. 

 Pay a $14 million penalty: The FDIC and the CFPB imposed civil money penalties of $14 million. Discover 

will pay $7 million of that penalty to the U.S. Treasury and $7 million to the CFPB’s Civil Penalty Fund.