Sterling Jewelers fined by CFPB for unauthorized credit card accounts

Register now

Sterling Jewelers, the largest U.S. jewelry retailer, agreed Wednesday to pay $11 million to settle claims by the Consumer Financial Protection Bureau and New York state that employees opened store credit card accounts and enrolled customers in payment-protection insurance without their consent.

Sterling, which operates 1,500 retail stores under names brands such as Kay Jewelers and Jared the Galleria of Jewelry, compensated employees based on quotas of credit card applications, according to a CFPB order. Employees at stores in shopping malls allegedly were required to complete one credit card application a day while those at standalone stores had to complete one application every two days the CFPB said.

“Many of Sterling’s store managers and district managers encouraged deceptive tactics to induce consumers to apply for a credit card, and many turned a blind eye to such conduct,” the CFPB said in the 18-page order, which was released Wednesday. “In many instances, Sterling’s sales representatives induced consumers to provide their personal information by purporting to sign up consumers for a store 'rewards card,' loyalty program, newsletter, or mailing list. In fact, the sales representatives used consumers’ personal information to submit a credit application.”

Sterling, a unit of Signet Jewelers Ltd. based in the United Kingdom, said in a statement that it “disagreed with the allegations,” but cooperated with the investigations to avoid the expense of litigation.

“Signet has cooperated fully with the CFPB and NYAG investigations, and 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,” the company said. “We have used this opportunity to internally reaffirm the transparency and fairness of our credit-related policies and we look forward to continuing to provide our customers with access to suitable credit options.”

From 2014 to 2017, Sterling had more than 3 million open credit accounts each year that generated more than $300 million in net revenue, the CFPB said. Roughly 60% of Sterling’s total sales are financed by consumers using Sterling’s in-house credit.

Until roughly June 2017, Sterling also offered payment-protection plans that generated $60 million a year, the CFPB said.

In some instances, Sterling’s employees told consumers about the insurance and asked to sign customers up "so that the employees could meet their quotas — while promising the consumers that the employees would cancel the insurance before the consumers were charged," according to the settlement.

Typically, the insurance plans were not canceled and consumers were still charged, the consumer bureau said.

Sterling agreed under the settlement to pay a $10 million civil penalty to the CFPB and $1 million to the State of New York.

Sterling also agreed, as part of the settlement filed in the U.S. District Court for the Southern District of New York, to refrain from continuing the illegal conduct of opening credit cards without customers’ consent.

For reprint and licensing requests for this article, click here.
Credit cards Credit reporting Insurance Enforcement actions CFPB New York
MORE FROM AMERICAN BANKER