Jeweler Credit Card Accounts Are Fake, Claims CFBP Lawsuit

By KJ McElrath | March 20, 2019

Category: Legal News

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

Sterling Jewelers Inc., a subsidiary of Signet Jewelers Ltd., recently entered into an $11 million settlement with the Consumer Financial Protection Bureau and the State of New York in order to resolve allegations of opening jeweler credit card accounts in customers’ names without their authorization or knowledge.

According to the lawsuit, Signet, which operates approximately 3,500 stores under several different brand names under the Sterling name, opened more than one million fake credit accounts over a four-year period.

How Did This Happen?

It is possible that Sterling and its subsidiary took a page from the playbook of Wells Fargo Bank, which recently ran afoul of federal regulators over similar allegations. Sterling management allegedly exerted extreme pressure on sales representatives to meet sales quotas, specifically jeweler credit card accounts. Employees who failed to meet these quotas reportedly faced negative performance reviews, reduced compensation and even loss of their jobs.

Federal and state regulators say that in order to meet these quotas, store representatives would obtain customer information by offering to sign them up for a “loyalty” or “rewards” program, or getting them to join a mailing list. This information would allegedly be used fraudulently in order to open credit accounts in their names.

Another tactic allegedly used was to trick customers into signing up for store credit accounts by telling them they were interest-free and there would not be any monthly fees.

Millions of Fake Jeweler Credit Card Accounts Were Created

This latest scandal comes at a time when brick and mortar retail outlets are losing sales to massive online discount websites such as Amazon. As a result, they are seeking to diversify their revenue streams.

With interest rates currently ranging between 26 and 30 percent, jeweler credit card accounts represent a lucrative source of income for these companies. Industry analyst Ted Rossman told the Wall Street Journal, “Legacy retailers, with their traditional business under pressure, they are making more and more money from these credit cards.” Interest rates on jeweler credit card accounts are some of the highest in the retail industry.

Credit accounts at Sterling and its subsidiaries generate over $100 million a year. Approximately 60 percent of its customers finance jewelry purchases through such credit accounts. However, according to court documents, more than one million of these accounts opened between 2013 and 2017 were fraudulent, opened without the customer’s consent or knowledge. Many customers did not become aware of the fraud until they received a credit card in the mail.

Sterling Responds

In entering into the settlement, Signet and Sterling neither confirm nor deny the allegations, which according to a CFPB press release include violations of the the Consumer Financial Protection Act of 2010 and the Truth in Lending Act. A spokesperson said, “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.”

Signet also states that it is cooperating with regulators and has agreed to take action in order to make certain customers are aware that they are signing up for credit accounts and are informed about all applicable terms, conditions and associated fees.

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: