October 30, 2009

Slammed by Discover Card

I've been slammed by Discover Card (DFS). [Class action lawsuit here.]

This used to be a terrific card - a great brand. No fee, cash back, nice service.

But now they have a new modus operandi: they call repeatedly asking you to sign up for "Account Guard Plus Discover Payment Protection" which charges 0.89% per month for credit card payment insurance.

Of course I always say "no."

The idea of paying an extra 11.2% per year for the benefit of deferring a payment once in a while is really stupid beyond words. Nobody should sign up for this sort of scam - this type of insurance protects the credit card company, not you, and it boggles the mind that it is legal to sell it at all.

Last month Discover called and said, "you're signed up, okay", and I said, "no, do NOT sign me up... DO NOT."

And today I get a letter to say I am signed up anyway.

Three Years To Trash a Business

Back when Phil Purcell ran Discover Card, he lead the company with a pro-consumer, low-cost vision. Purcell built Discover into an incredibly strong and trustworthy brand. Under Purcell, Discover had a small group of fiercely loyal customers, including me.

David W. Nelms took over in 2005 after Purcell was forced out and Discover was spun off. Since then, Nelms has paid himself handsomely, making himself one of the top paid CEOs in the country - $45 million over the last 5 years. Perhaps shareholders think Nelms is running Discover well. But he is not.

In three short years, Nelms has destroyed the Discover brand.

Instead of improving his product, Nelms has been using Discover's good name to steal. What used to be the lowest-cost card became the industry's worst purveyor of PPI scams and fraudulent phone slamming.

Abusing the Taxpayer Bailout

Perhaps the Nelms plan has been to inflate the company's short-term numbers quickly to sell out to a bigger bank. Bank of America bought MBNA at a steep premium, and maybe Discover hoped to follow. If that was the Nelms plan, that would explain why Discover is raping its customers for extra revenue as quickly as possible.

Like other overextended lenders, Discover is a recipient of 1.2 billion in bailout funds. Discover is also the recipient of a huge 2.6 billion antitrust settlement from Visa and MasterCard. DFS is swimming in free cash.

Nelms spins visions for shareholders about expansion in China and Europe. But he doesn't talk about how he is pilfering his American customers to do it. It is an idiotic strategy.

Nelms is doing nothing to help U.S. consumers, and he is a poor custodian of the Discover brand. He has proven itself utterly undeserving of U.S. bailout funds.

Nelms Attracts Class Action Lawsuits

Last time David Nelms ran a company into the ground, he was heading up marketing for MBNA. There he attracted a series of class action lawsuits over his lies. Nelms left before the lawsuits were settled.

Now Nelms is attempting the same trick with Discover.

If there is a class action suit this time around, I want in.

Update: there is. Sign up here.

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