The Federal Deposit Insurance Corp. is reviewing Discover's marketing practices of its payment protection program, which may possibly lead to regulatory action.
In its first quarter 10-Q filing with the Securities and Exchange Commission, Discover disclosed that the FDIC was “reviewing the company’s marketing practices with respect to its fee-based products, including its payment protection fee product, which could lead to an enforcement action,” according to CTWatchDog.com.
The filing revealed eight class action cases pending against Discover that are challenging its marketing practices of fee-based products, according to the San Francisco Chronicle.
The current FDIC examination is focusing on the company's payment protection fee product.
Customers who opt for Discover’s payment protection service pay a fee based on the credit card borrower’s “total balance at the end of each monthly billing period (including any partial monthly billing period at the beginning of your enrollment), multiplied by 89¢ per $100,” according to CTWatchDog.com.
The service allows customers to put loan payments on hold for up to two years in the case of qualifying events, including disability or hospitalization. It also allows customers to put payments on hold for one billing period following celebratory events such as childbirth or marriage.
The fee, on an annual basis, would be 10.5 percent.
In the filing, Discover wrote it will "vigorously defend all claims asserted against it," according to the San Francisco Chronicle.