Dive Brief:

• The Consumer Financial Protection Bureau sued the credit card company Reliant Holdings, which does business as Horizon Card Services, as well as its CEO, Robert Kane, for allegedly lying to customers and charging excess fees in violation of the Truth in Lending Act.
• The Indiana, Pennsylvania company promised to provide customers with credit cards with a specified credit limit and no credit check, but then charged mandatory fees to join an online outlet store, the federal agency said in the lawsuit. 
• The vast majority of Horizon card holders dropped the membership almost immediately without ever using the credit card, meaning they paid exorbitant membership fees without ever using Horizon's product, the CFPB says in a lawsuit filed Friday.

Dive Insight:

Between 2017 and 2021, only 6% of Horizon customers actually used their cards, and only between 1% and 3% of customers used the ancillary products such as the online outlet store operated by Horizon, the agency says in its lawsuit. 

Horizon customers were generally offered credit limits of about $500, and were charged mandatory fees of up to 60% of the that credit limit, the suit says. 

That percentage violates the Truth in Lending Act, which was passed in 1968 and was intended to promote informed use of lending products such as credit cards, according to the suit.

A representative of Horizon Card Services did not immediately respond to a message seeking comment Monday.

Reliant Holdings, as Horizon is also known, also made canceling its credit cards unreasonably difficult, the CFPB contends. 

The company advertised cancelation services could be done in less than a minute, but in practice it made customers listen to pitches for discounted and third-party products, the lawsuit says. The company then refused to cancel products unless customers threatened to report Horizon to the Better Business Bureau, the CFPB lawsuit says. 

The agency seeks to force Reliant to stop its deceptive marketing practices, and aims to have a judge impose a monetary penalty which would be added to the CFPB victims relief fund, the agency said in a Friday press release regarding the lawsuit.

The CFPB, led by Director Rohit Chopra, launched an initiative targeting junk fees across the financial services sector two years ago as part of a campaign by the Biden administration to rein in such fees. The agency estimates the campaign could save Americans $19.5 billion annually if it succeeds.