Texas Sues Friedman’s Over Consumer Insurance Deceptions

Texas Attorney General Greg Abbott yesterday (Monday) sued Friedman’s Inc., alleging the company misled its customers about the level of required insurance coverage when applying for installment credit on purchases.

The Attorney General is requesting penalties of up to $20,000 per violation of the Deceptive Trade Practices Act, consumers’ restitution and attorneys’ fees.

“The company represents itself as a long-term, reliable friend of the customer, yet it went to great lengths to lure unwitting customers into misleading insurance contracts as part of jewelry purchases on credit,” said Attorney General Abbott. “The company should have been clear that these ‘side’ agreements are completely optional with such purchases.”

According to the lawsuit, Friedman’s allegedly broke the Texas Deceptive Trade Practices Act by pressuring lower-income customers into signing a “statement of insurance” while getting approved for purchases on credit.

Optional credit insurance protects the loan if the consumer misses payments or defaults. In November 2003 Friedman’s announced that its lenient loan policy to customers is backfiring and is subsequently setting a side an increased sum of money to cover defaulted loans.

Costumers were not told the full nature, extent and expense of the coverage, the lawsuit claims, and some customers were billed for the full credit insurance.

Friedman’s has 650 retail jewelry stores in the U.S., including 65 stores in Texas.

“The company offers multiple forms of credit on jewelry purchases, including the store’s own “Advantage Credit” program – a card that triggers the company’s retail installment credit contract with the customer,” the Attorney General said in a statement.

“It is within this line of credit that the company engaged consumers in the scheme to buy credit insurance, which, often unbeknownst to buyers, can include property, life and disability insurance,” he added.

According to the lawsuit, this coverage should have been represented as optional to the customer, not mandatory.

the Attorney General went on to call on consumers who believe they signed a contract for credit insurance with Friedman’s without the company giving the proper disclosures to file a complaint with his office or by going online to the agency’s Consumer Protection Web site.