CFPB Sues Texas Company for Issuing 'Sham' Credit Card

A Texas firm accused of selling consumers a buying club card disguised as a general-purpose credit card was sued Wednesday by the Consumer Financial Protection Bureau.

The card, offered by Union Workers Credit Services cost $37 for snail-mail applicants and $95 online, the CFPB said. While thousands of consumers signed up for the card, most never used it and were unable to obtain refunds, the bureau alleges.

Direct-mail advertising for the card included deceptive language, the CFPB said, such as, “You don’t have to worry if you have been denied access to a VISA or MasterCard,” and claims that the recipient was “pre-approved…for a platinum card with a 5% APR and a $10,000 credit limit.” The bureau claims consumers were unable to use the card to make purchases for anything except items sold by the company.

Calls placed to a phone number attributed to Union Workers Credit Services were met with an answering machine message that said the firm could not take calls, and told callers to write a letter instead. The firm’s website has only the message, “our website is currently undergoing temporary maintenance.”

The firm has been in business since 2004, and has attracted thousands of complaints and an “F” rating from the Better Business Bureau. Earlier this year, New York Attorney General Eric Schneiderman announced a settlement with Union Workers Credit Services after receiving numerous complaints from New York residents. The firm agreed to offer refunds, pay $50,000 in penalties, and not do business in New York in the future.

The CFPB’s suit also accused Union Workers Credit Services of:

Falsely advertising an association with unions. The bureau says the company deceives consumers by falsely suggesting that it is affiliated with labor unions. The banner of its website has photos of police, firefighters and medical workers. The online application form asks consumers to select their union membership from a drop-down list.
Misusing consumer credit reports. Federal law requires that when companies use consumer credit reports to target certain advertisements to consumers without their advance consent, they must advise those consumers of their right to opt out of receiving such advertising. The bureau alleges that Union Workers Credit Services failed to do this.

“The business model for Union Workers Credit Services is built on duping consumers into signing up for a sham credit card,” said CFPB Director Richard Cordray. “Hundreds of thousands of people, including a great many union members who were specially targeted, have been tricked into spending millions of dollars for a so-called credit card that can really only be used to buy the company’s own products. From the misleading photos of nurses and firemen on its website to its bogus credit card, Union Workers Credit Services is illegally deceiving consumers.”

Keep in mind that receiving a credit card offer in the mail is no promise of being approved. You should compare credit card offers and make sure you’re applying for a card that fits your spending and credit needs. For example, if you have bad credit, you stand a larger chance of not being approved for a premium rewards credit card and may want to look at a secured or student credit card instead. You can check your credit scores for free on Credit.com to see where you stand.