First Usa To Halt Vendors' Deceptive Solicitations

Attorney General Spitzer today announced a settlement that will provide new protections against misleading telemarketing campaigns for more than 53 million credit card holders.

First USA Bank N.A. - the largest issuer of Visa credit cards - and also known as Bank One Delaware NA, has agreed to implement broad reforms in its relationships with third-party vendors to ensure that non-deceptive marketing campaigns are used in soliciting the bank's credit card holders. Specifically, under the agreement, First USA must prohibit vendors from engaging in deceptive solicitations.

This agreement adopts the same protections that were announced last February when Citibank, the world's largest credit card issuer, agreed to police the marketing practices of its vendors.

"As a result of the aggressive efforts by the states, approximately 150 million consumers of two of the most prominent credit card issuers will be provided better protections against deceptive telemarketing tactics," Spitzer said.

In settling the case, 28 states and Puerto Rico conclude a three-year investigation of First USA's practice of providing information regarding its credit card holders to third-party vendors that would then solicit those customers to buy the vendors' products.

The investigation by the attorneys general determined that the marketing practices of these vendors were often deceptive and sometimes resulted in consumers being charged for products or services that they had no idea they had agreed to purchase.

For example, many vendors used free trial offers and gifts such as airline tickets to induce credit card holders to accept solicitations for the purchase of products and services that included insurance products, special interest membership clubs, discount shopping programs, and prepaid plans for such services as optical supplies or roadside assistance.

Often, it was not clearly disclosed to consumers that they had an obligation to cancel during the so-called "risk-free" trial period or have their credit card charged. Also, many consumers later discovered that their airline ticket gift had little value because it required the purchase of an expensive vacation package.

Making matters worse, the confirmation by the vendors never included asking card holders for their credit card account numbers and instead simply asked consumers to "confirm" their name and address in order to avoid "clerical mistakes." These practices led many consumers to believe that they were accepting an offer that would simply expire with no obligation to themselves. Instead, consumers discovered unauthorized charges on their credit card accounts.

The settlement bars First USA from charging a consumer unless the vendor obtains the consumer's express authorization for the purchase. It also requires First USA to:

  • Review and approve all telemarketing scripts and marketing materials of its vendors;

  • Compel its vendors to comply with federal and state consumer protection laws;

  • Require its vendors to provide clear and conspicuous disclosure of the identity of the telemarketing company if the script makes reference to the bank.

In settling the case, First USA agreed to pay $1.3 million, of which New York State will receive $125,000 to cover the costs of its investigation.

Joining New York State in this settlement are: Arizona, California, Colorado, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Vermont, Washington, Wisconsin and Puerto Rico.

Individuals with questions about the settlement with First USA or with concerns about unauthorized charges on their credit card accounts are encouraged to contact the Attorney General's consumer help line at (800) 771-7755 or visit the office's web site at www.ag.ny.gov.

This case was handled by Assistant Attorneys General Stephen Mindell, Herbert Israel, and Shirley Stark of the Consumer Frauds and Protection Bureau.


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