Friedman's Settles Credit Insurance Lawsuit

Friedman's Jewelers reached a settlement agreement with 18 state attorneys general and will repay customers credit insurance they paid for without their consent and, at times, without being aware of it. It is unclear how much the settlement will cost the jeweler.

The Texas headquartered jewelry chain was sued by the attorney general of Texas in December of 2004, alleging the company misled its customers about the level of required insurance coverage when applying for installment credit on purchases.

At the time, the attorney general requested penalties of up to $20,000 per violation of the Deceptive Trade Practices Act, consumers’ restitution, and attorneys’ fees.

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.

A few days later Tennessee and Florida joined in suing Friedman's. Eventually, Alabama, Arkansas, Delaware, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, and South Carolina sued the jeweler. They are included in the settlement.

According to the settlement, Friedman's must stop the credit insurance charge, and start providing customers applying for credit clear disclosure of any extra insurance charges.

Friedman's did not admit fault in the agreement reached last Tuesday.