Attorney General Lockyer Reaches $4.2 Million Settlement in Lawsuit Against Crescent Jewelers
Company Agrees to Halt Deceptive Sales and Grant Refunds to Customers

September 24, 2001
01-093
FOR IMMEDIATE RELEASE

(SACRAMENTO) – Attorney General Bill Lockyer today announced he and four district attorneys reached a $4.2 million settlement in a consumer protection complaint charging Crescent Jewelers, a large jewelry store chain with 100 stores in California, with deceptive and unfair business practices.

"Our investigation found that many customers who financed purchases through store-arranged credit were misled by employees into buying insurance they didn't even know about," Lockyer said. "This settlement will ensure that eligible California consumers who were duped into paying for unwanted policies will have those costs reimbursed and that store employees will improve the way they treat their customers."

The settlement agreement was signed this morning by Santa Cruz Superior Court Judge Robert Atack. The case was brought by Lockyer and District Attorneys Kathryn Canlis of Santa Cruz, Dean D. Flippo of Monterey, George W. Kennedy of Santa Clara and Gordon Spencer of Merced counties. Named as defendants with Crescent Jewelers were three underwriters of the credit insurance: American Bankers Life Assurance Company, American Bankers Insurance Group and American Reliable Insurance Company. Under the agreement, the defendants do not admit any wrongdoing.

Lockyer and the prosecutors alleged Crescent Jewelers tacked on optional credit life, disability and property insurance to finance documents of customers making purchases through retail installment contracts. Many of the customers were unaware of the added costs and Crescent failed to provide them with copies of the optional insurance policies they were unknowingly purchasing. Among other alleged deceptive and unfair business practices, the complaint charged Crescent employees with failing to provide copies of the sales contract in Spanish, as required by state law when the sales transactions are conducted in Spanish.

Under the settlement, Crescent agrees to refund up to $3 million to customers who purchased the insurance policies from January 1, 1996, through July 1, 2000. In July 2000, after the prosecutors' investigation began, the company changed the way employees sold credit insurance.

Eligible customers will be contacted within the next few months to determine whether they want to keep their insurance policies, receive a refund or have credit posted to their store account. The average refund is expected to be $25-$35 per credit account.

The agreement requires Crescent to pay $930,000 in civil penalties to the prosecuting agencies and $20,000 to the Department of Insurance. American Bankers Insurance Group will pay $250,000 in civil penalties to the prosecuting agencies.

Among terms of the proposed permanent injunction, Crescent also agrees to:

• Not make false or misleading statements when selling credit insurance or warranties.
• Affirmatively disclose to consumers that buying credit insurance or a warranty is optional.
• Affirmatively disclose the costs, terms and features of the insurance and warranty policies.
• Make Spanish-language contracts available to Spanish-speaking consumers.