In a reflection of Washington's recent zeal for consumer protection, a new credit card marketing pitch boasts that the company treats customers fairly.
Television spots for Discover Financial Services' (DFS) "it" card emphasize that customers don't owe a late fee after their first overdue payment. The ads end with the slogan: "We treat you like you'd treat you." The card's tag line: "Fair. Generous. Flexible. Human."
"The consumer in those commercials is expecting the worst," and flabbergasted to be treated decently by a credit card company, says Campbell Edlund, president of EMI Strategic Marketing.
Discover's previous ad campaigns played up the company's ample cardholder rewards and its customer service staff based in the United States. The marketing of the "it" card reprises those themes, while adding the consumer protection angle.
"It's not a change in who we're trying to reach," says Discover Chief Executive David Nelms. "It's how we reach them."
Discover's message about fairness comes at a time when federal regulators' four-year-old focus on consumer protection shows no signs of abating, though the company says the regulatory push was not a factor in the design of its marketing campaign. Credit cards are one of many financial products that fall under the purview of the nearly two-year-old Consumer Financial Protection Bureau.
Discover itself took a high-profile hit in September, when it paid $214 million over what the CFPB deemed deceptive marketing of credit card add-on products, including payment protection. The company says it's stopped selling payment protection.
The "it" card (lowercase "i"), which Discover launched nationwide in January, is the company's new flagship consumer credit card. In its advertising, the firm is focusing on persuading competitors' customers to switch cards.
"We believe that any material growth in 'it' could come at the expense of the major card issuers," analysts at Sandler O'Neill wrote in a recent research note, "as many of the features of 'it' appear to be targeted at consumers who might be unhappy with their current card offering."
Charts comparing Discover's new card with offerings from other issuers are a major part of the company's ongoing marketing push, Nelms told investors during a recent conference call. "And we're seeing customers respond to that," he said.
The company points to a number of features to support the claim that it treats customers fairly. For example, Discover does not charge new customers overlimit fees or foreign transaction fees, and paying late does not raise the customer's annual percentage rate.
Some credit card executives would likely frown at the notion of promoting the fact that late payments will be forgiven, according to Edlund.
"I think some in the industry would suggest that there's a danger that you would be acquiring a customer who was focusing on those benefits," she says.
But Discover sees an opportunity to win over consumers who may be disillusioned with what they consider gotcha fees, says Julie Loeger, the company's senior vice present of brand and acquisition. "It's just the combination of all these fees that many players could charge we don't charge," she says.
Discover's new card does carry other charges, including balance transfer and cash advance fees. Customers also owe up to $35 starting with the second late payment, and up to the same amount for returned payments. The card carries a 0% introductory annual percentage rate, which increases to 10.99% to 22.99% after 14 months.
Holders of the new Discover card are relying a little less on balance transfers than the firm's existing customer base did, while spending slightly more on their cards, according to CEO Nelms. But just as before, "we're pursuing a broad prime customer base."
Reaching potential customers requires advertising, of course. And at a time when many banks were paring back their expenses, Discover spent $169 million on marketing and business development in the first quarter of 2013, up 32% from the same period a year earlier.
The lion's share of that money was spent on marketing the new card, according to the company, though Discover officials did not provide a specific breakdown of the spending.
It is too early to say whether Discover is getting a good return on its advertising, says David Darst, an analyst with Guggenheim Securities.
The volume of sales on Discover's proprietary network was up a modest 4% year over year in the first quarter of 2013. "The product is still new," Darst cautions. "Adoption can take a while."
Discover's marketing emphasis on consumer protection dovetails with its long-standing message about the quality of its customer service.
Earlier Discover ads took a humorous shot at competitors that rely on offshore call centers by featuring "Peggy," an unhelpful customer service rep with a beard and a foreign accent.
The company's new message also takes advantage of what was arguably one of its existing strengths, the September fine from the CFPB notwithstanding.
Discover scored best among the top nine U.S. credit card issuers in a recent analysis of the Consumer Financial Protection Bureau's complaint database. The report, written by the data analytics firm Beyond the Arc, calculated the number of complaints for each issuer as a percentage of the number of credit cards each company had in circulation.