Deceptive Marketing Practices: Discover Bank

Deceptive Marketing Practices: Discover Bank

"Misleading representations and deceptive marketing practices can have serious economic consequences, especially when directed toward large audiences or when the take place over a long period of time;" and that was exactly the case that occurred with Discover Bank (Competition Bureau Canada 1). Deceptive marketing practices involve the use of misleading or deceptive marketing and advertising materials in order to trick consumers in purchasing a product or service they would have otherwise avoided buying. It is an unfortunate problem that occurs much more often than the average consumer would like to see. As such, these deceptive marketing practices can disadvantage the consumer, causing them to loose faith in the market, as well as tarnishing the reputation of those parties who are known to utilize such practices within their marketing and sales techniques.

Background of Problem

Today's market environment for financial products and services is already vulnerable. After the recession and the disappointing bail out for many American banking institutions, many consumers have lost their confidence in banking systems in general. Yet, Discover Bank was always an institution that tended to have a strong reputation for giving back to the consumer. Its credit card services are known for their increased rewards, and many Discover members believed they were involved with a different type of bank -- one that actually cared about their customers. However, recent events have changed that image dramatically. In September of 2012, the bank was targeted by the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) in regards to a year long investigation that uncovered the use of deceptive marketing practices to trick baking customers to purchase unnecessary credit products (). The research explains that Discover Bank was involved in "telemarketing and sales tactics that they said 'mislead' consumers into paying credit card 'add-on' products" and that "Discover implied that the products were free" (Kim 1). Between 2007 and 2011, Discover Bank utilized these deceptive marketing techniques to trick their consumers in agreeing to products that they would then receive charges for unknowingly. Many paid fees for months, not even knowing that they were being charged after agreeing to a supposed free service. According to the research, "telemarketers selling payment protection, credit score tracking, and other credit card extras misled consumers about charges, withheld important information or spoke quickly when they disclosed prices and terms of the add-on products" (Stephenson 1). As a result of the investigation, Discover will now have to pay over $200 million in fee refunds to customers who were deceived along with $14 million in penalty fines (Stephenson 1).

Philosophical Critique

Deception is most often frowned upon within the wide myriad of philosophies that help guide both individual and organizational behavior. One example are the theories within the concept of moral philosophy, the idea of moral judgment is innately linked without ability to use our intuition to make decisions. From a consequentialist perspective, an act is morally right when it "produces at least as good a ratio of good to bad consequences (e.g., in terms of welfare or utility) as any other course of action" (Smith, Kimmel, & Allan 19). This can also be seen as a utilitarian philosophy, and under such a philosophy Discover's actions are morally wrong because they were intended to produce more negative consequences than good. The products they were selling were not worth the hidden fees and deception that were involved with purchase. Moral philosophy also can take on a nonconsequentialist perspective, which is more "binding with moral rules or duties and consequences" (Smith, Kimmel, & Allan 19). As such, the moral action would have been to tell the truth; yet, Discover deliberately misled customers, avoided discussing fees, and sped through sales pitches in order to confuse potential buyers. Discover should have clearly notified all buyers of fees at the very beginning of the conversation. Finally, there is a third philosophy which would critique Discover's actions. From a Didactic tradition, it is important for a moral person to teach and express their morality in order to help inspire similar moral actions in others. Socrates was one of the most infamous teachers who aimed to help expand and model the examined life. His criticism here would be clearly based on the fact that Discover held a high respect within the banking industry. If it was using deceptive practices, it was only teaching other less responsible banks to do the same. So, not only did Discover harm its own clients, but it provided a model for other banks to harm their customers as well.

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