Discover Financial Services (DFS.N) said its subsidiary, Discover Bank, will pay about $200 million to cardholders who bought certain credit-protection products over the phone, as part of an agreement with U.S. regulators.
The issuer of credit cards, which reached an agreement in principle with the Federal Deposit Insurance Corporation (FDIC) and Consumer Financial Protection Bureau (CFPB), will pay an additional $14 million in penalties to be split between the regulators.
Discover Financial said in January it had been notified by the Federal Deposit Insurance Corp and the Consumer Financial Protection Bureau over its marketing practices for fee-based protection products, such as balance protection.
The company said it will refund money to cardholders who bought the products by telephone from December 2007 to August 2011.
The agreement comes almost two months after Capital One Financial (COF.N) agreed to pay $210 million to resolve charges by U.S. banking regulators that its call-center representatives misled consumers into paying for extra credit card products.
Discover Financial shares closed at $38.62 on Friday on the New York Stock Exchange.
(Reporting by Ashutosh Pandey in Bangalore; Editing by Gary Hill)