Signet Jewelers will pay $11 million in civil fines to settle a federal and New York state investigation that found the national jewelry retailer tricked consumers into signing up for store credit cards, credit insurance and related promotions and payment-protection products.
As part of the settlement, Signet on Wednesday said it does not admit or deny the allegations and findings of fact in the case involving its Sterling Jewelers Inc. subsidiary that was investigated by the Consumer Financial Protection Bureau and the New York attorney general’s office. The company also agreed not to contest the findings.
The company disclosed in a regulatory filing that it will pay $10 million to the Consumer Financial Protection Bureau and $1 million to New York state.
Shares in the Akron-headquartered company on Wednesday closed down 46 cents, or 1.4 percent, to $33.36.
The Consumer Financial Protection Bureau said in a news release that the parallel investigations found that Sterling violated the Consumer Financial Protection Act of 2010.
The violations involved Sterling opening store credit card accounts without customer consent, enrolling customers in payment-protection insurance without their consent and misrepresenting to consumers the financing terms associated with the credit card accounts, the bureau said.
“The bureau also found that Sterling violated the Truth in Lending Act by signing customers up for credit card accounts without having received an oral or written request or application from them,” the release said. “The state of New York found that Sterling violated several provisions of state law.”
“By tricking consumers into enrolling in store credit cards, Sterling Jewelers betrayed customers’ trust and violated the law,” New York Attorney General Letitia James said in a news release. “This settlement holds the company accountable for its misconduct and ensures that no more consumers are deceived.”
The New York attorney general’s office said in its release that Sterling employees “used a variety of tactics to deceive consumers into enrolling in store credit cards.”
In some cases, the release said, employees told consumers they were being enrolled in a “rewards” or discount program “but in reality, sales representatives used the personal information to complete and submit credit card applications.”
Consumers often didn’t know about the credit card application until they noticed an unexplained inquiry on their credit report or received the card in the mail, the New York attorney general’s office said.
“In addition, when consumers knew they were applying for credit, Sterling employees misrepresented the terms of the store credit cards,” the release said. “Sterling employees told consumers that they were being enrolled in a 'no interest' promotional financing plan, when in reality they were signed up for a plan that included monthly financing fees.”
The AG’s office also said Sterling enrolled consumers in credit insurance related to the store credit cards without consumers’ knowledge or consent.
“Signet has cooperated fully with the CFPB and NYAG investigations, and while we disagree with the allegations made against Sterling, we chose to negotiate a resolution of this matter to avoid the time, expense, and uncertainty of litigation with the agencies,” the company said in a statement released Wednesday. “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 consent order filed in U.S District Court for the Southern District of New York says in part that the company and all of its employees:
• Cannot misrepresent why they are asking for a consumer’s personal information involving a credit card application.
• Cannot issue a credit card to consumers without their knowledge or consent.
• Must disclose to consumers that they are enrolling in an optional payment-protection insurance product.
• Must tell consumers that their selection or signature on a PIN-pad, tablet or other device will result in their enrollment in payment-protection insurance.
Signet must submit a report to the consumer bureau and to the New York attorney general's office within 90 days describing compliance with the consent order and the company must also undergo compliance monitoring. The company was told to keep and maintain records related to the court order for five years.
The court order says the company cannot claim, assert or apply for a tax deduction, tax credit or another tax benefit for the civil money penalty.
The company said it will recognize an $11 million pretax charge for its fourth quarter ending Feb. 2.
Signet’s brands include Kay, Jared, Zales, Piercing Pagoda and others.
Jim Mackinnon covers business and county government. He can be reached at 330-996-3544 or firstname.lastname@example.org. Follow him @JimMackinnonABJ on Twitter or www.facebook.com/JimMackinnonABJ.