Sterling Jewelers, Comenity Bank Hit with Class Action Over Phony Store Credit Card Sign-Ups

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Two plaintiffs have filed a proposed class action over Sterling Jewelers’ alleged practice of signing consumers up for store-branded credit cards without consent. The suit also names as a defendant Comenity Bank, who allegedly should have known about Sterling’s fraudulent store credit card signups yet processed completed applications nonetheless.

The 31-page complaint kicks off by explaining Comenity, in 2017, purchased Sterling’s in-house credit card portfolio while the jeweler, which owns and operates better-known retailers Kay Jewelers and Jared, was the focus of an investigation into its apparent practice of enrolling consumers in store credit cards without authorization. The investigation, run by the Consumer Financial Protection Bureau (CFPB) and New York Attorney General’s Office, stemmed from consumer allegations that Sterling employees had misrepresented that customer information was needed to “update records.” This personal information, in truth, was used by Sterling employees to run credit reports and fraudulently issue credit cards, the lawsuit says, all without consumers’ knowledge or consent.

Invoking the Wells Fargo scandal, Sterling, the lawsuit alleges, incentivized its managers and employees to submit as many consumer credit card applications as possible. Sterling went so far as to require employees to submit at least one credit card application per day at the company’s mall locations, according to the suit, and one every two days for those working in brick-and-mortar stores. The lawsuit claims that employees who failed to meet Sterling’s credit card application quotas received either additional training or were fired.

Per the case, Sterling customers only found out about the company’s fraudulent behavior when they were pinged by credit reporting agencies. Others had no idea until they received a certain package in the mail:

“Deceived consumers often first learned about these unauthorized cards, accounts, and insurance products when they received notification from a credit reporting agency that a new credit inquiry had been made. Other consumers had no idea that a credit application had been processed until they received a physical credit card in the mail.”

With regard to Comenity’s supposed role, the lawsuit argues that the credit card issuer assumed a significant responsibility when it bought Sterling’s portfolio roughly two years ago. Even with a government investigation underway and a history of consumer complaints about Sterling, Comenity, the case stresses, made no changes to how it obtained customer credit applications nor its verification procedures.