On September 13, 2024, the CFPB sued Horizon Card Services and its CEO Robert Kane for tricking consumers into signing up for its expensive membership credit card. The CFPB alleges Horizon and Kane attracted consumers to the membership program through deceptive marketing tactics.
From CFPB Director Rohit Chopra’s statement:
“The CFPB is suing Horizon and its CEO Robert Kane for gouging low-income Americans and making it nearly impossible to cancel for a full refund. The CFPB will continue to closely scrutinize illegal fee harvesting and price gouging, and hold individual financial executives accountable for their role in wrongdoing.”
Reliant Holdings, doing business as Horizon Card Services, is a nonbank corporation offering consumers enrollment in membership open-end credit lines, under numerous brand names. The Horizon Card Services membership came with periodic fees and was targeted toward financially vulnerable, subprime consumers. Horizon’s credit card, which could come with almost $300 in annual fees on a card with a $500 credit limit, could only be used to purchase goods from the company’s overpriced online store called Horizon Outlet.
The CFPB alleges that Horizon and Kane violated the Consumer Financial Protection Act and the Truth in Lending Act. Specifically, Horizon and Kane misled and harmed consumers by:
Luring consumers with lies. Horizon promoted the Horizon Card as a standard credit card but it was actually a membership with a limited line of credit usable only at the Horizon Outlet online store. The ads failed to disclose these limitations, leading 94% of customers to never make a purchase from the store.
Gouging people with illegal fees. From 2017 to 2021, Horizon charged customers up to $24.99 a month in “membership fees,” totaling about $300 a year. These fees were 60% of the $500 credit limit for the first year, exceeding the 25% cap set by the Truth in Lending Act and Regulation Z.
Trapping people in “memberships”. Consumers faced a complicated cancellation process with Horizon, which included numerous sales pitches and required complaints or threats to get a full refund. Horizon promised some customers a quick phone cancellation for a full refund, but this was not always honored.
The CFPB’s lawsuit aims to halt the alleged unlawful behavior, provide compensation to affected borrowers, and impose a civil money penalty to be deposited into the CFPB’s victims relief fund.
Read the CFPB’s press release here.
The complaint can be found here.