A national jewelry chain that owns Kay Jewelers, Jared The Galleria of Jewelry and several other brands will pay $11 million to settle claims that its employees signed customers up for store credit cards without their knowledge or consent, New York Attorney General Letitia James said Wednesday.
The company, Sterling Jewelers Inc., was accused of using information gathered at the time of sale from customers to sign them up for credit accounts and credit insurance, which many did not realize until they were alerted through a credit report or received a physical card in the mail.
That was the result of quotas imposed by Sterling on its employees to enroll customers in those accounts, James said. Performance reviews and pay was partly based on fulfilling those quotas, which James said created intense pressure on those employees.
“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.”
The Consumer Financial Protection Bureau, a federal agency, also worked on the investigation and settlement with James’ office. Under the settlement, Sterling is set to pay $10 million to the bureau and $1 million to New York.
A spokesman for Sterling said they disagree with the allegations levied against the company by the Attorney General’s Office, but chose to settle the matter rather than risk a larger penalty at trial. Sterling is a subsidiary of Signet, which is among the world’s largest jewelry retailers.
“Signet has cooperated fully with the CFPB and NYAG 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,” the spokesman said. “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.”
Employees at the company apparently used a variety of tactics to enroll customers into those credit programs, James’ office said. In some cases, they would tell customers they were signing them up for a rewards or customer discount program. The information collected would then, instead, be used to submit credit card applications on behalf of those customers.
When a customer was intentionally applying for credit, James’ office said employees with the company would misrepresent the terms of those accounts. Customers were told on some occasions that they were signing up for an account with no interest when, in reality, they would be charged monthly financing fees.
Sterling, based in Ohio, operates about 1,500 jewelry stores in the United States. About 130 of those locations are in New York. Its stores operate under several names, including Kay Jewelers, Jared The Galleria of Jewelry, J.B. Robinson Jewelers, Marks & Morgan Jewelers, Belden Jewelers, Goodman Jewelers, LeRoy’s Jewelers, Osterman Jewelers, Rogers Jewelers, Shaw’s Jewelers and Weisfield Jewelers.
The case was handled by Special Counsel Carolyn Fast of the Consumer Frauds and Protection Bureau.