The CFPB earlier this month filed suit against Horizon Card Services and its CEO and sole shareholder Robert Kane for allegedly tricking subprime consumers into signing up for a high-fee credit card that only allowed them to purchase goods from the company’s overpriced online store.  

The outlet that consumers were required to use had a limited selection of overpriced or off-brand goods.

The company’s credit card often had a limit of $500 and came with fees of $300, according to the complaint, filed in the U.S. District Court for the Western District of Pennsylvania. “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,” CFPB Director Rohit Chopra said.

Between 2017 and 2021, Horizon allegedly enrolled almost 900,000 consumers in its membership program. According to the complaint, 93% of those consumers never used any Horizon product yet paid over $45 million in fees.

The CFPB alleged that Horizon and Kane lured consumers into their membership program through deceptive marketing. Horizon charged consumers illegal and excessive fees, and also made it unreasonably difficult for consumers to cancel memberships and obtain refunds, according to the suit.

The CFPB charged Horizon and Kane of violating the Consumer Financial Protection and the Truth in Lending Act by:

  • Marketing the credit card as a regular credit card without disclosing that consumers were required to purchase items from the Horizon Outlet.
  • Requiring customers to pay up to $300 in membership fees. That amounted to 60% of the $500 credit limit Horizon imposed during the first year of membership. That far exceeds the 25% cap set by Section 127(n)(1) of the Truth in Lending Act, 15 U.S.C. § 1637(n)(1).
  • Requiring members who tried to cancel their membership to go through a “difficult and time-consuming cancellation process.” The company also failed to provide full refunds unless a consumer continued to complain or threatened to contact the Better Business Bureau or their bank, according to the bureau.