Signet Jewelers, the parent company of jewelry brands such as Jared, Kay Jewelers, and Zales, agreed to an $11 million settlement with the Consumer Financial Protection Bureau (CFPB) and New York Attorney General for penalties related to allegedly opening credit card accounts without customer consent, according to The Wall Street Journal.
The settlement was signed with Sterling Jewelers, a subsidiary of Signet Jewelers, which operates more than 1,500 jewelry stores throughout the US. The company — which agreed to the settlement without admitting to or denying the charges — reportedly pressured its salespeople into signing customers up for store credit cards and enrolling them in payment protection insurance without their consent.
Sterling’s policy reportedly imposed stringent store card enrollment quotas on employees, which likely led to the practice. The brand reportedly would base performance reviews and compensation on these quotas, and at times even terminated employees for failing to meet them, per regulators.
As a result, salespeople may have persuaded customers to provide personal information under the impression that they were enrolling in a rewards or loyalty card program. And though regulators didn’t disclose how many store cards were opened using these strategies, over 1 million accounts were opened between 2013 and 2017 that were never used by the cardholders, indicating a potentially massive impact.
In a moment where issuers are competing to win market share among customers with a high appetite for credit, fake account scandals could ultimately erode consumer loyalty and trust.
- Sterling’s case is reminiscent of Wells Fargo’s 2016 fake account scandal, which continues to impact the bank’s business over two years later. In 2016, the bank’s employees opened over 2 million accounts for customers without their knowledge — a move that prompted financial regulators to more heavily crack down on marketing practices companies use to sign customers up for financial accounts. Prior to that scandal, between 2012 and 2015, Amex, Bank of America, Capital One, Chase, Citi, and Discover collectively paid $123.6 million in fines to the CFPB for deceptive credit card practices, like enrolling customers in credit card add-on features for a fee. Under this settlement, Signet will adhere to compliance actions to ensure consumers know and consent to credit card issuance and payment protection insurance. Signet’s could lose customers as these practices become public knowledge, particularly as they could negatively impact customers’ credit scores: Wells Fargo, for example, had a long fallout following its scandal and is largely still recovering, indicating that these types of scandals can have a long-term impact on Signet’s brand perception.
- Store cards are being threatened by traditional cards that offer better rewards, making it imperative for retailers to find new ways to attract cardholders. Private-label store credit cards have historically been a popular alternative to credit cards as they come with retailer-specific perks and incentives. But increased credit appetite in the US has caused issuers to ramp up their rewards, which has made store cards less attractive. Nearly 60% of Sterling’s total sales are financed by consumers using store credit cards, likely making them an important tool in driving sales for the company. Increasing preference among customers to use traditional, rewards-heavy credit cards and tightening regulations on marketing practices to promote cards will make it necessary for firms to strategize new ways of attracting sign-ups for their store cards.
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