Pennsylvania Attorney General Jerry Pappert has filed a civil lawsuit against Cross Country Bank and its Pennsylvania-based collection company, following claims that hundreds of consumers with impaired credit were targeted for pre-approved credit cards that were deceptively marketed.
The defendants are also accused of improperly disclosing charges and fees, and engaging in abusive and illegal debt collection tactics when cardholders defaulted on their accounts. The state's investigation involved complaints from more than 400 consumers throughout Pennsylvania.
Texas sued Cross Country Bank earlier this month.
"This case represents one of the more egregious examples of predatory lending because specific consumers were targeted and further harmed by the defendants' alleged deceptive and illegal business practices," Pappert said at a news conference in Philadelphia.
"Instead of helping consumers as promised, the defendants actually pushed cardholders further into debt when they used the credit cards. Those who failed to make the payments, were subjected to a barrage of abusive, harassing collection practices that included the use of profanity and multiple calls to consumers' homes or offices."
Cross Country, based in Delaware, and Applied Card Systems Inc., Glen Mills, Pennsylvania, are accused of violating Pennsylvania's Consumer Protection Law and Fair Credit Extension Uniformity Act.
According to the suit, the defendants since 1999 have used direct mail solicitations and the website www.crosscountrybank.com to promote and market credit cards and services for consumers with impaired credit or lack of credit history. The defendants claim to have more than three million customers nationwide.
The ads promoting the pre-approved credit cards and services include claims that the cards carry a line of credit in the thousands of dollars to help consumers obtain the "positive credit history they deserve." In reality, the credit limits are much lower than advertised and the cards include inadequately disclosed initial and monthly fees as well as other charges that have already been deducted from the minimal credit available, the suit states.
Many consumers who received the pre-approved credit cards thought their credit limit would be as high as $2,500. Once the final paperwork arrived, they learned that their credit limit was far lower than the amount advertised. They also learned that the balance was further reduced once the fees and other charges were deducted. In many cases, consumers available credit was just $250 to $350.
The Commonwealth claims that some of the alleged improperly disclosed fees include a $100 application fee or $10 monthly maintenance fee, a $50 annual membership fee, a $30 late or over-the-limit fee, and other fees for customer assistance, payment processing over the telephone or Internet and debt collection services.
Other allegedly deceptive fees include an optional $10 express handling charge to approve consumers' credit card application within 10 days even though the process is typically completed within that time frame.
Investigators said similarly deceptive fees exist in the defendants' "Credit Account Protection" or CAP benefits program. Each month cardholders are charged $1 per $100 balance on their credit card accounts toward disability, job loss or death benefits. Under the program, CAP pays a monthly benefit equal to five percent of the consumers' credit card balance up to $10,000. In reality, few consumers ever had balances high enough to derive a benefit from the coverage.
Pappert said the lawsuit also accuses the defendants of abusing, harassing, misleading and deceiving consumers through a variety of illegal debt collection practices including:
• Making multiple or frequent telephone calls to consumers at home and at work over an extended period of time.
• Continuing to contact consumers even if they requested not to be contacted at home or at work.
• Using obscene, profane, derogatory, rude and hostile language in communicating with debtors or their family members.
• Contacting consumers before 8 a.m. and after 9 p.m., which is prohibited by law.
• Failure to close consumers' accounts when requested to do so and/or falsely stating that they are prohibited from closing the accounts forcing consumers to continue to pay the fees.
• Misled consumers about their identity when calling on the telephone. They also implied that they were lawyers in their written correspondence or collection letters to consumers.
• Making improper legal and physical threats to coerce payments from consumers.
• Making improper contact with third parties including close family members and children.
Pappert said, "One Philadelphia consumer was contacted as much as ten times a day. Another consumer received 12 harassing voice messages at work, still another was subjected to profanity and physical threats. All of these tactics are outrageous and illegal."
The lawsuit asks the court to require the defendants to:
•Pay restitution to consumers who suffered monetary losses as a result of the defendants' alleged illegal business practices.
•Pay civil penalties of $1,000 per violation and $3,000 for each violation involving a consumer age 60 or older.
•Forfeit their right to conduct business in the Commonwealth until all restitution and fines are paid.
•Forfeit all profits that were derived as a result of the alleged illegal business practices.
Pappert urged Pennsylvania consumers who suspect that they were victimized in this case to obtain a complaint form by calling 1-800-441-2555.