AG to Sterling Jewelers: Store Credit Cards Aren’t Forever

A Kay Jewelers store. AP Photo/Nam Y. Huh.

By Jonathan Sperling

Maybe diamonds aren’t New York State’s best friend.

Attorney General Letitia James blasted Sterling Jewelers on Tuesday after she announced an $11 million settlement against the specialty jewelry company for swindling customers into signing up for store credit cards without their consent.

In partnership with the Consumer Financial Protection Bureau (CFPB), James stated that Sterling, which operates Kay Jewelers, Jared The Galleria of Jewelry and other stores, used deceptive tactics to sign shoppers up for credit cards without their knowledge. The company also “enrolled consumers in a credit insurance product without consumers’ knowledge or consent and misrepresented the terms of the store cards,” she said.

“By tricking consumers into enrolling in store credits cards, Sterling Jewelers betrayed customers’ trust and violated the law,” James said. “This settlement holds the company accountable for its misconduct and ensures that no more consumers are deceived.”

Sterling, which operates about 130 stores in New York, also imposed store card enrollment quotas on employees and based employee performance reviews and compensation on the quotas, according to the investigation. This created intense pressure on employees to enroll consumers in store cards, leading employees to resort to deceptive tactics, such as inducing consumers to provide personal information by purporting to enroll them in a “rewards program” or discount program, according to the investigation.

In many cases, consumers did not realize that they had been signed up for a credit card until they noticed an unexplained inquiry on their credit report or received the card in the mail, investigators said.

Even when consumers knew that they were applying for a credit card, Sterling employees misrepresented the terms and fees associated with the card, according to the investigation. Though employees told consumers that they were being enrolled in a “no interest” promotional financing plan, the consumers were actually signed up for a plan that included monthly financing fees.

“Signet has cooperated fully with the CFPB and NYAG [James’] 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. 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,” a spokesman for Signet Jewelers Limited, which owns Sterling, told the Eagle.

Signet did not respond to a question of whether it still imposes store card enrollment quotas on employees.