Dive Brief:

• The credit card provider Reliant Holdings, which does business as Horizon Card Services, said it was clear and upfront with customers about fees in response to a lawsuit filed by the Consumer Financial Protection Bureau earlier this week.
• Indiana, Pennsylvania-based Reliant has been working with regulators in good faith, but was blindsided by the CFPB's legal action, the company argued in a news release on Wednesday.
• "Unfortunately, after four plus years of active and direct cooperation, we are disappointed to learn of the CFPB's decision to unexpectedly file suit," the news release said. "We believe this is an unnecessary step."

Dive Insight:

Reliant pledged to continue to work with regulators to resolve the issue and said its goal is to provide access to credit and benefits that were oftentimes “unavailable to many," Reliant’s news release said.

The credit card company lured customers with the promise of a credit card with a specified credit limit and no credit check, but then charged significant fees for ancillary services, such as an online outlet store operated by Horizon, the bureau alleged in its lawsuit.

The fees equaled up to 60% of a customer's credit limit, which was typically around $500, the CFPB contended.

The company then made it nearly impossible for card holders to cancel their credit cards, unless they threatened to report the company to the Better Business Bureau. 

Only a small percentage of Horizon card holders used their cards on the online outlet store, the CFPB said in its lawsuit. 

Reliant did not dispute the CFPB's allegations about fees and poor customer service in its news release. A Reliant spokesperson declined to comment on whether the company would fight the lawsuit in court, but denied the allegations in an emailed statement.

“Horizon Card Services vehemently rejects every aspect of the CFPB’s lawsuit,” the statement said. Prior to consumers enrolling in our membership, they were “required to acknowledge that they reviewed and agreed and understood the costs and material terms and conditions associated with our program,” it noted.