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MajorsJan 17, 2019
Signet Jewelers Fined $11M Over In-Store Credit Cards
The jewelry giant disputed allegations that its in-store credit practices were deceitful but said it will pay the fine to put an end to litigation.
Akron, Ohio—Signet Jewelers has agreed to pay $11 million in fines after its in-store credit practices caught the eye of regulatory agencies, though the jewelry giant has not admitted to any wrongdoing.
Sterling Jewelers, the unit comprised of Kay Jewelers and Jared the Galleria of Jewelers along with a few regional brands, has been ordered to pay $10 million to the U.S. Consumer Financial Protection Bureau and $1 million to the office of New York Attorney General Letitia James.
James accused the company of pushing employees to sign customers up for in-store credit cards by setting sign-up quotas and linking the number of customers signing up to employees’ performance reviews and compensation.
The New York attorney general also said Sterling misled customers into thinking they were signing up for a rewards program but then used their information to file credit card applications. Consumers didn’t know they had signed up for a credit card until they received a credit report inquiry or the card showed up in their mailboxes.
Even in situations when customers knew they were applying for credit cards, employees allegedly misrepresented the terms by telling customers they were being enrolled in “no interest” promotional financing plans when, in fact, there were monthly financing fees.
Lastly, the attorney general’s office said consumers were enrolled in credit insurance—a type of policy that pays off a debt in the case of an unforeseen circumstance—connected to their in-store credit cards without their knowledge or consent.
“By tricking consumers into enrolling in store credit cards, Sterling Jewelers betrayed customers’ trust and violated the law,” James said in an official statement. “This settlement holds the company accountable for its misconduct and ensures that no more consumers are deceived.”
Signet said in a statement that while it disagrees with the allegations, the company has chosen to settle to avoid the time and cost of continued litigation.
“We have used this opportunity to internally reaffirm the transparency and fairness of our credit-related policies, and we look forward to continuing to provide our customers with access to suitable credit options,” the jewelry retailer said.
Signet took a deep dive into its credit practices back in 2016 after analysts began commenting on the amount of subprime debt weighing heavy on its books, meaning the company might have been lending to too many consumers with low credit scores.
The company announced plans to outsource its credit portfolio back in May 2017, selling $1 billion worth
of prime-only accounts to Alliance Data System Corp, and completed its outsourcing in July 2018.
The Consumer Financial Protection Bureau notified Signet in September 2017 via a letter that its Office of Enforcement might recommend legal action against the company for violating provisions of the Consumer Financial Protection Act of 2010 and the Truth in Lending Act.
In addition to paying the fines, Signet will be required to thoroughly inform consumers about the in-store credit cards and credit insurance as well as complete a written compliance progress report for James’ office, as per a consent order filed in federal court in New York City.
The $11 million pre-tax charge will be recognized in the company’s fiscal fourth quarter results, which it is slated to report in March.
The Consumer Financial Protection Bureau notified Signet in September 2017 via a letter that its Office of Enforcement might recommend legal action against the company for violating provisions of the Consumer Financial Protection Act of 2010 and the Truth in Lending Act.
In addition to paying the fines, Signet will be required to thoroughly inform consumers about the in-store credit cards and credit insurance as well as complete a written compliance progress report for James’ office, as per a consent order filed in federal court in New York City.
The $11 million pre-tax charge will be recognized in the company’s fiscal fourth quarter results, which it is slated to report in March.
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