Sub-prime Credit Card Issuer To Provide $11 Million In Restitution

Attorney General Spitzer today announced an agreement with a leading sub-prime credit card issuer to resolve an investigation into its marketing and billing practices.

Under the agreement, Columbus Bank and Trust Company and CompuCredit Corporation will reform their business practices and provide $11 million in restitution to New York consumers.

"This agreement sets a new standard in the way sub prime credit cards are marketed and collected, and reflects the state's ongoing commitment to protect those most vulnerable to fraud and deception," Spitzer said.

The Attorney General's office began a probe of the Georgia-based Columbus Bank last year after receiving a number of consumer complaints regarding the bank's Aspire Visa credit card. The investigation revealed that Columbus Bank, in partnership with CompuCredit, a specialty financial service company that provided marketing, billing and collection services to the bank:

  • Failed to properly disclose activation charges of as much as $179 on Aspire Visa cards, which were marketed to people with poor credit histories;
  • Exaggerated the lines of credit associated with the credit cards;
  • Repeatedly enrolled cardholders in third party membership programs without consumers' knowledge or consent and then billed cardholders renewal fees; and
  • Engaged in improper debt collection practices.

In settling the matter, Columbus Bank and CompuCredit agreed to improve disclosure of fees and charges, clearly state credit lines, and reform debt collection practices. The two companies will also make restitution of $11 million to cardholders, including credits and refunds for account activation fees and charges for third-party membership clubs. In addition, the companies will pay $525,000 to the state in civil penalties and costs.

Columbus Bank and CompuCredit cooperated fully with the Attorney General's investigation.

Individuals eligible for credits or refunds will be contacted by a letter directly from Aspire Visa/ Columbus Bank. Consumers with questions about the agreement may contact the Attorney General's office at (518) 474-5481.

This settlement follows a decision and order the Attorney General obtained this past January against Cross Country Bank, another large subprime credit card issuer, in which Supreme Court Justice Thomas McNamara ordered the bank to pay approximately $10 million in penalties and restitution for making deceptive credit card offers that trapped vulnerable consumers in cycles of mounting debt.

The Columbus Bank and CompuCredit matter was handled by Assistant Attorneys General Mark Fleischer and Amy Schallop of the Consumer Frauds and Protection Bureau.

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