ALBANY, N.Y. (AFX) - A Georgia-based credit card company has agreed to pay $11 million in restitution to New Yorkers to settle a New York state investigation into its practices.
Columbus Bank and Trust Co. and CompuCredit Corp., a marketing and collection company, agreed to reform practices for its sub-prime credit cards held by 60,000 New Yorkers, Attorney General Eliot Spitzer said. The cards are marketed to consumers with lower incomes or credit problems who are willing to pay higher rates and fees to secure credit cards.
Spitzer had accused the company of failing to disclose activation charges of as much as $179 on Columbus Bank's Aspire Visa cards that were marketed to low-income people and consumers with poor credit. He also said the company exaggerated how much credit would be provided, enrolled customers in other programs without consent and then billed them with renewal fees. Spitzer also criticized the company's debt collection practices.
There was no immediate comment from the companies about the settlement signed Thursday. Spitzer said the companies cooperated in the investigation.
Under one offering called 'Little Rock,' a customer would get a $300 line of credit but immediately would be hit with a $179 activation fee, according to Spitzer's complaint. Customers also would face a $29 accounting opening fee and a $150 annual fee.
Collection practices included several calls a day to consumers, calls at work and calls to neighbors, according to the complaint.
New Yorkers will receive compensation for activation fees and the cost of third-party membership clubs. The company also will pay $525,000 to the state in civil penalties and costs.
In January, Cross Country Bank, another sub-prime credit card provider, was ordered by a state court to pay $10 million for its lending practices.
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.