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FTC Lawsuit Against CompuCredit and Jefferson Capital

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The Lawsuit

The Federal Trade Commmission vs. CompuCredit Corporation and Jefferson Capital Systems, LLC filed on June 10, 2008

Outcome

Not yet decided. The FTC is asking for a $200 million penalty.

Details

According to the lawsuit complaint, CompuCredit marketed a subprime Visa credit card with a $300 credit limit. However, they did not make it clear to customers that they could be charged up to $185 in upfront fees leaving only $115 in available credit.

Another part of the lawsuit includes a credit card with a $3,250 credit limit marketed to consumers with higher credit scores. In this case, CompuCredit didn't make it clear that only a portion of the credit limit was available for the first 90 days as their spending habits were analyzed. Then, after 90 days the remaining credit could be reduced if the cardholder shopped at certain places inluding: tire treading shops, massage parlors, bars, billiard halls, and marriage counselors. The FTC is not suing because of the screening, but because the process was not disclosed to consumers.

Finally, CompuCredit and Jefferson Capital, its subsidiary, marketed a Visa credit card that could be used to pay charged-off accounts. The companies promised the customer's credit report would be updated to reflect the account was paid in full. The companies failed to properly disclose that cardholders would be enrolled in a debt payment program and would not receive credit cards until a certain percentage of the debt had been repaid.

Law(s) Violated

The FTC alleges both companies violated the FTC Act and that Jefferson Capital violated the FDCPA by calling excessively and calling outside the allowed hours.

Related Case

In 2006, CompuCredit entered a $11 million settlement with New York Attorney General (at the time) Eliot Spitzer for similar allegations. The company agreed to change their marketing practices after that suit.

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