On September 8, the Federal Deposit Insurance Corporation announced that it had ordered Comenity LLC to pay nearly $64 million in civil money penalties and restitution for alleged deceptive advertising and marketing of credit card add-ons, in violation of Section 5 of the Federal Trade Commission Act. Comenity LLC manages credit card programs for several major retailers and the major credit card companies.
According to the FDIC, Comenity Capital Bank and Comenity Bank offered “free” payment protection and debt cancellation add-on products while still assessing fees and issuing false statements about the refund process if consumers cancelled the products within thirty days. The FDIC also alleged that the Comenity entities made false statements about certain terms and conditions on gift cards or credits to consumer accounts that were tied to the add-on products.
Comenity Bank was ordered to pay a $2 million civil penalty and around $53 million in restitution to consumers. Comenity Capital Bank was ordered to pay a $450,000 civil money penalty and an additional $8.5 million in restitution. The restitution payments will apply to any consumer who purchased the add-on products from Comenity between January 2008 and September 2014.
In October 2014, Comenity Bank paid $8.4 million to settle a Telephone Consumer Protection Act (TCPA) class action. Other lawsuits alleging similar claims are still pending.