Home > Credit Resource Center > Credit Headlines > Lawsuit Leveled Against CompuCredit

<A TARGET="_target" HREF="http://www.lowermybills.com/crc/index.jsp?i=i&sourceid=lmb-13572-29280-23328"><IMG SRC="eic_crc_TargBalTran_WomanCivilDncButt15s30k_0308_728x90.gif" BORDER=0></A>

Lawsuit Leveled Against CompuCredit

Posted by: Henry Baum | Jun 11,2008


It’s hard enough getting by trying to fend off identity thieves.  There is evidence that some credit card companies are deceitful as well, if not downright fraudulent.  U.S. regulators allege that the telemarketing firm, CompuCredit, engaged in deceitful practices by withholding important information about fees.  In addition to CompuCredit, allegations have been leveled at First Bank of Delaware and First Bank & Trust for employing deceitful practices that affected hundreds of thousands of cardholders. 

Deceitful Lenders

These allegations are very similar to those leveled against the mortgage industry following the subprime mortgage meltdown in the summer of 2007.  Regulators also charged lenders with not revealing hidden mortgage costs.  As a result, thousands of mortgage holders found that they could no longer afford the terms of the mortgage after a certain period.  This combined with declining home values is core to why the housing bubble burst.  

On the heels of that, regulators are much more mindful of these deceitful practices.  The new lawsuit against CompuCredit alleges similar practices.  The company was not sufficiently upfront about the costs of a credit card agreement, leading to increased fees for hundreds of thousands of customers.  This lawsuit can be seen as a warning to credit card issuers – and the lending industry on the whole – that these types of deceitful practices will no longer be tolerated. 

Not Disclosing Fees

The suit alleges that CompuCredit and two major banks did not disclose fees to borrowers with bad credit.  This is not a case of those borrowers not sufficiently scouring the terms and conditions of the credit card agreement, but that the fee scale was not available even in fine print – a distinct violation against the Truth in Lending Act, which was written to target exactly this type of non-disclosure.  The lawsuit alleges that CompuCredit awarded credit cards with a $300 limit without informing customers of $185 in fees for that same card.  Additionally, other credit cardholders were not informed that a credit limit would only be available after 90 days.  

The lawsuit is a big one: the FDIC after $200 million from CompuCredit and over $6 million in civil penalties for First Bank of Delaware and First Bank & Trust.  A third bank, Columbus Bank & Trust settled out of court, signaling that the lawsuit has merits.  In a sense, CompuCredit is taking the fall for what is perceived as deeply-rooted problems in the credit industry.   CompuCredit denies the charges are valid.  

Sponsored Resources Ads by Google

<A TARGET="_target" HREF="http://www.lowermybills.com/crc/index.jsp?i=i&sourceid=lmb-13571-29279-23156"><IMG SRC="eic_crc_TargMenuCredTypePerkCardLink3Arrow_0308_728x90.gif" BORDER=0></A>