Parent Company of Kay Jewelers Settles Allegations of Fraudulent Sales Practices for $11 Million

This article is not legal advice. It is presented
for informational purposes only.

The parent company of Kay Jewelers and Jared The Galleria of Jewelry has agreed to pay $11 million in fines to settle two investigations into potentially shady sales practices at myriad locations owned by Sterling Jewelers Inc., a subsidiary of Signet Jewelers Limited.

Although Sterling does not admit or deny any wrongdoing, the company will pay the U.S. Consumer Financial Protection Bureau $10 million and the office of New York Attorney General Letitia James a total of $1 million. The federal and state investigations were conducted concurrently.

Both investigations determined Sterling’s jewelers violate the Consumer Financial Protection Act of 2010 when employees allegedly opened store credit card accounts without receiving a customer’s consent and enrolled customers in payment-protection insurance without receiving prior consent. In addition, some customers were allegedly told they were being enrolled in a type of reward program, but were really signing up for store brand credit cards.

New York A.G. James also said Sterling employees lied to customers when they presented credit card terms that included zero percent interest. The customers were actually charged financing fees, James said. Such misleading statements to consumers is a violation of the Truth in Lending Act, according to the Consumer Financial Protection Bureau.

Investigators suspect that employees’ motivation behind the allegedly fraudulent sales practices included sales quotas that if not met, negatively affected job performance reviews. According to documents filed with the court, employees of the jewelers faced termination if they did not meet credit-application performance standards.

The scheme’s structure and motivation echoes the fake bank accounts scandal that rocked Wells Fargo a couple of years ago and gave rise to subsequent investigations at other financial institutions’ sales practices.

Kay Jewelers, Jared Among Affected Retail Shops

Signet disclosed the investigations were underway in December 2017 and says it will account for the $11 million as a pre-tax charge in the quarter that ended Feb. 2, 2019.

Signet says it is the world’s largest retailer of diamond jewelry, operating more than 3,500 stores. Only those stores under the Sterling umbrella are affected by these investigations. Sterling operates nearly 1,500 jewelry stores around the United States under several different brand names.

In a prepared statement, Signet expressed disagreement with the alleged improprieties, but said it cooperated with investigators. The company said it “looks forward to continuing to provide our customers with access to suitable credit options.”

Signet announced in August 2018 that Chief Financial Officer Michele Santana was leaving the company once a replacement was found in 2019. According to the company’s website, she is still the CFO, and has been since August 2014.

The number of customers affected by the jewelry credit card scam are not known, but according to federal regulators, more than one million accounts were opened between 2013 and 2017 that were never used by the customers whose names were on the cards.

In February, Signet announced it was asking 2,600 employees in Akron, Ohio and 780 employees in Dallas, Texas to take voluntary buyouts after a poor showing of holiday sales. The company also said it is deferring merit increases for its Support Center employees in 2019 in order to save money.

Join a Free Jewelry Store Class Action Lawsuit Investigation

You may qualify to join this jewelry store credit card class action lawsuit investigation if you are a customer at any of the jewelry stores listed below and a credit card was opened in your name without your permission or you were misled about the terms of the credit card:

• Kay Jewelers
• Jared Galleria of Jewelry
• JB Robinson Jewelers
• Marks & Morgan Jewelers
• Belden Jewelers
• Goodman Jewelers
• LeRoy’s Jewelers
• Osterman Jewelers
• Rogers Jewelers
• Shaw’s Jewelers
• Weisfield Jewelers

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