CompuCredit Faces $200M Lawsuit

Washington, D.C. (AHN) - CompuCredit, along with two partner banks, is facing a $200 million lawsuit from two government agencies accusing the company of fraudulent credit card marketing.

According to the Federal Deposit Insurance Corp. and the Federal Trade Commission, the company, together with the First Bank of Delaware and the First Bank & Trust in Brookings, S.D., engaged in false advertising by intentionally omitting information regarding credit card fees and terms from borrowers.

This resulted in customers, mostly with little experience with credit cards, finding themselves in greater financial trouble than they began with.

The FTC lawsuit, filed Tuesday at an Atlanta district court, stated that CompuCredit allegedly advertised credit card services that come with a $300 credit as a way to obtain more customers. In the process, according to the report, the company misled the customers by failing to mention a number of upfront fees totaling $185, thereby leaving the credit down to $115.

A similar lawsuit was filed by the FDIC.

FDIC board member Thomas Curry accused CompuCredit of engaging in marketing strategies that were "designed to be unclear", and as a result "leave the unsophisticated in a spiral of debt," reported the Atlanta Journal-Constitution.

He acknowledged the possible $200 million in fines as compensation for "hundreds of thousands of consumers" affected by the scheme.

CompuCredit responded with a public statement defending its dealings, and saying that the charges were "untrue and without merit". It continued to say that it committed itself to informing its customers of all terms and agreements that come with any business dealings.

Other accusations against the company involved convincing customers with written-off debt to apply for a Visa credit card, only to be required to pay off 25 to 50 percent of their debt before being able to apply for the debt repayment plan.