Attorney General Lockyer Announces Multi-state Agreement with First USA to Curb Deceptive Marketing Practices by Vendors

(SACRAMENTO) – Attorney General Bill Lockyer today announced that First USA has agreed to stop the deceptive marketing practices of third-party vendors who target First USA customers using information obtained from the credit card company.

Under an agreement reached with California, 27 other states and Puerto Rico, First USA, which offers credit cards under its own name as well as that of its parent company, Bank One, must require third-party vendors to provide clear and conspicuous disclosures to consumers and comply with other pro-consumer changes in telemarketing and mail solicitation practices. First USA also must pay $1.3 million for attorneys fees, investigative costs and consumer education.

"This settlement takes aim at marketing abuses in which First USA customers were charged for purchases they didn't realize they had ‘agreed' to buy," Lockyer said. "The new practices by First USA and its vendors will ensure that consumers will have the information they need to avoid falling victim to these deceptive practices."

The multi-state group two years ago began investigating the practices of several banks that shared consumer information with third-party vendors for the purpose of marketing the vendors' products and services to the banks' customers. A similar agreement was reached with Citibank in February.

The investigation showed that the marketing practices of vendors frequently were deceptive and sometimes resulted in consumers being charged for products or services that they didn't realize they had "agreed" to purchase. The solicitations often touted a "trial offer" that allowed the consumer to examine a product or service "risk-free," but did not make it clear that the cardholder would be charged unless they affirmatively canceled within a specific number of days.

Although the solicitations were made by third-party vendors, First USA selected cardholders for the vendors, the solicitations prominently used First USA's name, First USA approved all telemarketing scripts and mail solicitations and First USA received a percentage of the vendors' sales revenues. The company disavowed all responsibility for the third-parties' marketing practices.

Under the negotiated settlement, First USA agreed to permanently ensure that:

A cardholder's account shall not be charged without his or her express authorization of the purchase;

First USA reviews and approves all scripts and marketing materials;

No solicitation, material or script used by third-party vendors is deceptive;

Vendors who mention First USA in scripts or solicitations must make it clear that the bank is not affiliated with the vendor; and

Vendors must comply with all applicable consumer protection laws.

First USA also agreed, for a five-year period, to ensure that:

Vendors substantiate all descriptions of products and services as accurate and complete;

The identity of vendors and the fact that they are not affiliated with the bank is made in the opening of any telephone script and in the first page of any written solicitation;

Vendors clearly and conspicuously disclose information about the terms of the trial offer, including its duration and how to cancel; and

All solicitations and renewal notices clearly and conspicuously disclose important information, such as a description of the product or service and any limitations; the term of the trial offer; the fee; the method to cancel, including a toll-free number; information on the automatic renewal; and the cardholder's right to receive a full refund within the first six months after purchase.

"These are important safeguards that will more fully protect consumers, many of whom only "agree" to look at a product in order to end an unwanted call from a telemarketer," Lockyer said. "Under this agreement, the chances of consumers opening up their credit card statements and being confused about an unknown charge should be greatly reduced."