New York Forces First Premier To Refund $4.5 Million To New Yorkers, End Fraudulent Practices

15 Aug New York Forces First Premier To Refund $4.5 Million To New Yorkers, End Fraudulent Practices

New York State Attorney General Andrew M. Cuomo announced on August 15, 2007 an agreement with First Premier Bank to resolve an investigation into the company’s illegal and deceptive marketing of credit cards to thousands of consumers statewide with poor or no credit.

Under the terms of the settlement, First Premier, based in South Dakota, will pay $4.5 million in refunds and $105,000 in penalties and costs. The company will also reform its illegal billing and deceptive marketing tactics.

First Premier’s credit cards are usually marketed to “high risk” consumers with poor or damaged credit ratings and with limited potential for repayment. Rather than building good credit, however, borrowers often find themselves mired in credit card debt due to snowballing hidden fees, high interest rates, and very low credit limits.

The Attorney General’s investigation revealed that First Premier Bank lured consumers by falsely representing they were pre-approved for a credit limit up to $2000, at “9.9% APR Fixed,” and promising “no processing fee” for opening an account. The bank also solicited consumers directly, repeatedly touting the prestige of their Gold and Platinum cards without disclosing the associated risks.

In reality, most consumers received a $250 – $300 credit line at a 9.9% interest rate that could more than double without notice. Even before consumers had a chance to activate or use their credit card, First Premier billed $178 upfront fees for processing the credit card application. As a result, consumers’ found themselves with $70 – $120 in available credit, perilously close to the credit limit, and strapped with bills most believed they were obligated to pay. Additionally, most consumers reported their balance ballooned within a few months, sometimes from $20 to $400 as a result of hidden fees.

The Attorney General’s investigation found that in addition to the $178 upfront “processing fee,” First Premier charged account set-up and participation fees, annual fees, late fees, overlimit fees, credit limit increase fees as well as fees for paying online, accessing an account or additional card fees.

The bank is barred from fraudulent advertising and solicitation, and from promoting credit cards as
having “no processing fees,” if it charges consumers for applying or activating a credit card.

First Premier had discontinued the practices of misrepresenting the fees and credit limits associated with the credit card prior to this settlement. The bank cooperated fully throughout the investigation and worked with the Attorney General to resolve the matter.

Individuals who believe they might be eligible for a refund must file a complaint with the Attorney General within 90 days by calling the Attorney General’s Help Line at 1- 800 -771-7755 (Option 3). To obtain a copy of the settlement agreement, visit www.oag.state.ny.us.

This matter was handled by Assistant Attorneys General Mark Fleischer
and Joseph Wierschem of the Attorney General’s Consumer Frauds and
Protection Bureau.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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