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The suit, filed in state district court in Hennepin County, is the latest effort by authorities to rein in credit-card firms that are pumping up profits by selling fraud-protection and other credit-related products. The plans have long come under fire from consumer groups, which say customers often don't need or understand such services.
The Minnesota suit takes aim at four Discover products, including a "payment protection plan" that suspends a customer's obligation to make monthly credit-card payments under certain circumstances, such as unemployment or disability. The service costs 89 cents a month for every $100 of a credit-card balance. Another product, identity-theft protection, costs $12.99 a month. A credit-score tracker costs $7.99 a month.
Minnesota Attorney General Lori Swanson said her office has received an increasing amount of complaints from consumers who say they were duped into the products. Discover represented the bulk of the complaints, but she said she is also investigating complaints about other firms.
"People expect their credit-card company to stop and prevent these fraudulent charges, not to be the ones making them," she said in an interview. The suit says the company enrolled "tens of thousands of Minnesotans and charged them millions of dollars for enrollment in the plans."
Discover declined to comment specifically on the lawsuit, but defended its practice of selling such services. The company earned more than $295 million from enrolling customers in optional fee-based products last year, according to the lawsuit. "It's not in Discover's interest to sell a product that doesn't enhance our relationship with our card members. Many card members find Discover's protection products valuable as they provide peace of mind," the company said in a statement.
The lawsuit asks the court to order Discover to stop such practices and reimburse customers who bought services they don't want. It also seeks an unspecified amount of civil penalties.