New York Court Orders Cross Country to Cease Fraudulent Practices

Cross Country Bank • Consumer Complaints • Complaints about Applied Card Bank --- News • New York Fines Cross Country Bank $9 Million • Collection Agency Agrees to Write Off Cross Country Debts Owed by West Virginians • Cross Country Bank To Pay WV $1.5 Million • Cross Country Ends WV Stand-Off • Cross Country Bank Fined $450,000 by PA • WV, Cross Country Swap Charges • West Virginia Sues Cross Country Affiliate • New York Rules Against Cross Country • Pennsylvania Sues Cross Country • Texas Suit

July 5, 2004

Cross Country Bank • Consumer Complaints • Complaints about Applied Card Bank --- News • New York Fines Cross Country Bank $9 Million • Collection Agency Agrees to Write Off Cross Country Debts Owed by West Virginians • Cross Country Bank To Pay WV $1.5 Million • Cross Country Ends WV Stand-Off • Cross Country Bank Fined $450,000 by PA • WV, Cross Country Swap Charges • West Virginia Sues Cross Country Affiliate • New York Rules Against Cross Country • Pennsylvania Sues Cross Country • Texas Suit

Cross Country Bank will pay restitution to tens of thousands of New Yorkers in the latest court case involving the Delaware-based company.

New York Supreme Court Justice Joseph Cannizzaro ordered Cross Country to stop acts including fraud, false advertising, deceptive business practices and abusive debt collection practices that included "rude, insulting, obscene and threatening statements," according to the civil court decision. Restitution and penalties are still being determined.

The company, which is a unit of Applied Card Systems, is expected to be hit with millions of dollars in penalties and restitution payments.

"The fraudulent scheme by this credit card company is particularly egregious due to the vulnerability of the targeted individuals _ consumers with past financial problems eager to receive a credit card and rebuild their credit record," Attorney General Eliot Spitzer said.

In 2003, Spitzer’s office alleged that Cross Country Bank -- a "credit card specialty bank" -- targeted consumers with poor credit records with deceptive credit card solicitations, offering credit lines up to $2,500. The vast majority of consumers, however, received approximately $400 in credit, much of which was immediately applied to fees imposed by the bank, such as annual, application, and monthly maintenance fees, which significantly reduced the already minimal amount of credit available to consumers.

The effect of the limited credit lines and compounding fees and finance charges was to trap these unwary consumers in a vicious cycle of pyramiding debt from which they could not escape.

Specifically, Spitzer alleged that Cross Country Bank:

• Misrepresented the amount of credit available to cardholders;
• Fraudulently induced consumers into purchasing credit insurance that was of little or no benefit to cardholders;
• Fraudulently induced consumers to unwittingly enroll in fee-based membership programs; and
• Misrepresented the features of its secured credit cards.

Spitzer’s lawsuit claimed that, as a result of these acts, many cardholders unknowingly exceeded their credit limit, thus incurring additional $30 overlimit fees. In addition, consumers who were unable to bring their balance below the credit limit by the payment due date incurred $30 late fees.

As part of his lawsuit, the Attorney General also alleged that, after Cross Country Bank drove the cardholders into delinquency, its affiliate, Applied Credit Services (ACS) employed a variety of abusive and illegal collection techniques designed to harass cardholders into making a payment. These unlawful tactics include misrepresenting the caller’s identity; making repeated, frequent and disruptive telephone calls; calling cardholders at their place of employment; using rude, insulting and/or obscene language; and making false and improper threats.

In addition, the Attorney General alleged that ACS debited payments from cardholders’ accounts without authorization, and misrepresented payoff amounts.

Several other states have made similar claims against the firm, including Minnesota, Texas, West Virginia, Florida, Wisconsin, New Hampshire and Pennsylvania.

In a statement issued after the Pennsylvania suit was filed, the company said it was "disappointed" and claimed the suit was "full of factual errors."

"Several attorneys general across the country appear to be working together in the public domain in an effort to destroy our reputation without any regard for the facts," the statement said. "It is a disgrace that a company's reputation can be smeared like this in a public forum without ever having the opportunity to present facts from both sides."

The states' lawsuits charge that Cross Country provided high-interest credit cards to consumers with poor credit histories and charged them high fees that used up much of their available credit line. The firm's employees then harassed the consumers and used abusive language to collect on overdue accounts, the lawsuits contended.

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