Bank Accused Of Predatory Credit Card Practices

Attorney General Spitzer today announced a lawsuit against a Delaware-based bank that markets credit cards to people with severe financial problems and tarnished credit records.

Spitzer's lawsuit charges Cross Country Bank and its affiliate, Applied Card Systems, with fraud, false advertising, deceptive business practices and abusive debt collection practices.

Specifically, the company is accused of targeting low-income individuals and consumers with tarnished credit records with deceptive sales pitches for new credit cards. The company claims that the new cards will help consumers repair their damaged credit ratings. In reality, the cards carry exorbitant fees and other hidden costs that worsened consumers' financial problems.

"My office will aggressively combat predatory lending and credit practices that prey on vulnerable individuals and result in additional financial distress for consumers," Spitzer said.

Cross Country Bank advertises on the Internet that it: "strives to help customers rebuild their credit when they have experienced financial problems."

Spitzer said these claims are exaggerated, at best. He said his office has received more than 300 complaints about the bank, many pertaining to promotions that led consumers to believe they'd receive a credit card with a limit of up to $2,500. The vast majority of consumers, in fact, received approximately $400 in credit, much of which was immediately applied to annual, application, and monthly maintenance fees. In essence, many consumers were deceived into paying hundreds of dollars for as little as $100 in credit.

Because Cross Country Bank failed to adequately notify consumers of the exorbitant fees, many then unknowingly exceeded their limit, triggering additional "over-the-limit" and late fees.

Also, many consumers were deceived into enrolling in membership programs that offered them little to no benefit, but cost them additional fees. For example, Cross Country Bank repeatedly enrolled New Yorkers in the credit account protection program
although the fine print of the program excluded virtually all coverage for New York consumers.

The result was a cycle of compounding fees and greater debt that worsened the financial condition of many consumers, Spitzer said.

When consumers fell behind on a payment, Cross Country Bank's affiliate, Applied Card Systems, would make persistent and abusive dunning calls to their homes and places of employment, as well as to the homes of neighbors and relatives.

Spitzer's lawsuit seeks reforms by the bank, restitution for consumers and civil penalties and costs.

Cross Country Bank is based in Wilmington, Delaware. Applied Card Systems is based in Glens Mills, Pennsylvania.

In a separate action, the State of Minnesota today filed a similar lawsuit against Cross Country Bank and Applied Card Systems after receiving hundreds of complaints.

Individuals with complaints about fraudulent and abusive tactics of credit card issuers are encouraged to contact the Attorney General's consumer help line at 800-771-7755.

This case is being handled by Assistant Attorneys General Mark Fleischer, Matthew Barbaro and Jane Azia of the Consumer Frauds and Protection Bureau.

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