Citing “deceptive marketing practices,” the Federal Deposit Insurance Corporation and Consumer Financial Protection Bureau have announced a joint public enforcement action that orders Discover Bank, a subsidiary of Discover Financial Services and issuer of the Discover credit card, to refund $200 million to more than 3.5 million consumers.

Discover Bank was also hit with a $14 million civil money penalty.

The action results from an investigation started by the FDIC, and joined by the CFPB last year, that focused on telemarketing and sales tactics that allegedly misled consumers into paying for various “add-on products,” such as payment protection (allowing holders to put payments on hold for up to two years in the event of unemployment or hospitalization), credit score tracking, identity theft protection, and wallet protection (a service to help cancel credit cards after a wallet was stolen).

In a statement, the agencies wrote that: “Discover's telemarketers also often downplayed key terms and spoke quickly during the part of the call in which the prices and terms of the add-on products were disclosed.”

Among the allegations:

Discover's telemarketing scripts often used language implying that the products were additional free “benefits,” rather than products for which a fee would be applied to their accounts.

The telemarketing scripts frequently suggested that consumers would not be charged for the products until after having a chance to review printed materials from Discover. Discover, however, did not provide consumers with the information until after Discover had already initiated the consumer's purchase of a product.

Discover representatives processed the add-on product purchases without some consumers' consent. These consumers were then charged for the product on their Discover card.

Telemarketers typically did not disclose critical eligibility requirements for certain payment protection benefits, such as exclusions for pre-existing medical conditions and certain limitations concerning employment.

Under the consent order, Discover Bank has agreed to institute changes to its telemarketing efforts. It has also agreed to submit a compliance plan to the CFPB and the FDIC for approval, and to take corrective actions related to the services being sold.

The refunds agreed to will apply to consumers who were charged for one or more of the cited products between Dec. 1, 2007 and Aug. 31, 2011. With the exception of those who made use of Payment Protection, they will receive restitution based on when they purchased these add-on products and how long they had them. All consumers will receive at least 90 days' worth of fees paid (minus any refunds they have already received), with approximately 2 million consumers receiving full restitution of all fees they paid.

Compliance with the restitution terms of the order will be assured through the work of an independent auditor, who will report to the CFPB and FDIC on Discover's compliance with the joint CFPB-FDIC consent order.

A fact sheet on the consent order can be found here.

In July, the CFPB leveled its first public enforcement action, an order requiring Capital One Bank to refund approximately $140 million to nearly two million customers and pay a $25 million penalty. It also resulted from an investigation into “deceptive marketing tactics,” in that case by call-center vendors selling add-on services.