A legal dispute that started with First Premier, a credit card issuer, demanding that a credit card review website take down all its information is narrowing into a battle over links.
In federal court today in South Dakota, First Premier, a South Dakota-credit card company owned by United National Corporation, filed an amended complaint in its legal battle with Evolution Finance, the company that publishes CardHub, the credit card comparison website. It argued that CardHub had violated its trademarks by including information about the card after they had ended an advertising relationship in January, 2011 while still allowing its users to click a link to apply for the card
The suit, originally filed in April, received a scathing response in a motion to dismiss from Evolution's lawyers, who asserted a broad first amendment defense for its conduct. Their motion to dismiss the suit described it as an attempt to "suppress information about [First Premier's] credit cards on CardHub." CardHub continues to list a First Premier credit card, but it has no logos or an "apply now" button.
First Premier argues that by posting content on its card, including a link to apply for a card on First Premier's website, as well as "registered trademarks and unauthorized copes of First Premier's registered trademarks and unauthorized images of actual First Premier credit cards," Evolution Finance was acting as essentially an unregistered affiliate for First Premier. When contacted by First Premier's attorneys, Evolution Finance took down the "apply now" link on CardHub, but the link came back earlier this year after the site was updated.
First Premier later filed suit in federal court in South Dakota. The ongoing suit provides a window into the sometimes mutually beneficial and sometimes contentious relationship between credit card issuers and the sites that review them, as well as depend on them for their advertising.
In a memo also filed today, First Premier's attorneys said that the suit concerns the use of the link buttons to apply, "Nothing, more. Nothing, less." They also argue that using First Premier's logos and marks "in connection with links that send consumers to First Premier's application page is not intended to engender commentary or speech."
The focus on the link is "an odd strategy because it doesn't eliminate any of the First Amendment problems with their case," says Deepak Gupta, Evolution Finance's attorney. "The First Amendment protects people's right to link to other websites just as much it protects the right to criticize or discuss someone's products or services."
First Premier's cards, which are aimed towards consumers who already have lower credit scores and typically have high built-in fees, have long attracted scrutiny from regulators and consumer advocates. First Premier has defended itself as being one of the few companies willing to extend credit to less-than-worth borrowers, and that the fees are akin to insurance.
First Premier sued the Federal Reserve and the Consumer Financial Protection Bureau in 2011 after the regulator interpreted a piece of legislation capping fees to include high upfront fees like the ones First Premier charged. Ironically, First Premier said that "unauthorized and inaccurate promotions...may trigger a review of Premier's advertising by the CFPB as well as invite the scrutiny of the Federal Reserve and the OCC [the Office of the Comptroller of the Currency, the national banking regulator]."
"All CardHub was doing was running banner ads, but when you run a banner ad you're not a regulated provider of financial services. The onus is on the bank to comply with banking regulations. The newspaper or the TV station or whoever runs the ads doesn't become subject to the banking regulations," Gupta said.
The First Premier Bank MasterCard has a $95 upfront fee, a $75 annual fee, and charges a fee of $6.25 per month after the first year, to say nothing of a 36% interest rate. While credit cards for consumers with little to no credit history tend to charge higher rates, the array of fees charged by First Premier are unusually steep. For example, the Capital One Secured MasterCard, which sports a four-star rating from CardHub, has a $29 annual fee and no upfront or monthly fees.
Many credit card comparison websites similar to CardHub do not include any information about First Premier products. "It's not a product that you want to be associated with, there's no upside to encouraging it or talking about it," said Charles Tran, the founder of CreditDonkey.com. "Our site ideally lists products where there's value to our readers, and there's almost no point to their products."
Kevin Yuann, credit card director at NerdWallet, said that First Premier's cards "are not an appropriate product for people to build credit" and that his company "wouldn't feel good about [referring] people to them." While NerdWallet has affiliate relationships with several large card issuers, Yuann said that the majority of cards they list come from issuers where a business relationship with the company does not exist.
On its main page for credit cards for people with bad credit, NerdWallet has a disclaimer: "so-called 'unsecured' credit cards will probably cost you a lot of money. Two big-name providers of unsecured credit cards are First Premier and First Progress. We refuse to participate in the referral programs of these banks, or to link to them directly, but you can find them via Google."
CardHub's remaining content describing First Premier products "used First Premier's trademarks to "deceive and mislead the purchasing public," as well as damage its "business, reputation, and goodwill" and breach its advertising agreement, the company said in another legal filing.
The president of First Premier's sister company Premier Bank Bankcard's president Miles Beacom told Consumer Reports that the company "needs to retain control of its product." Beacom did not return a call for comment. An earlier filing alleges that information on CardHub "can be incomplete, inaccurate or simply wrong," but does not list a specific instance of incorrect information.
CardHub said in its motion to dismiss the suit that "through this lawsuit, First Premier attempts to use trademark and unfair-competition law to silence protected consumer criticism of its controversial credit cards." The information still on the site was "basic, non-affiliate data that is kept about every major credit card in America," CardHub said in its filing.
First Premier asked for a preliminary injunction to halt the use of the "apply now" button as well as "all profits resulting from Defandants" unfair competition," as well as further restitution and legal fees. The company's case is far narrower that what it asked for in its original letters in July 2011 to Odysseas Papadimitriou, chief executive officer of Evolution Finance, which demanded that CardHub remove "any mention of the Aventium credit card, and any and all references to First Premier bank."
Gupta, who used to work at the Consumer Financial Protection Bureau said that it made no sense to view CardHub as a business competitor infringing First Premier's trademarks, "CardHub is not selling competing credit cards, they're not selling competing credit cards of their own and that's what the trademark law is about."
The entry on CardHub for the First Premier Bank MasterCard Credit Card now does not show any logos — not even the MasterCard logo — or contain a link to First Premier. It does, however, show an overall 2.3 out of five star rating, including 144 two star and 59 one star reviews out of 291 total.
First Premier also objected to the fact that, even after the companies ceased their affiliate relationship, there was still an "apply now" button on the listing for First Premier. The company claims that the information listed near the apply now button was not complete, as is required by regulations around credit card advertising.
In another filing, an employee of Premier Bankcard, First Premier's sister company, said that a user clicked the Apply Now button and was brought to a landing page which "encourages users to review the terms and conditions of the First Premier credit card and provides a link to a First Premier application, where full terms and conditions can be accessed." Even though CardHub receives no advertising revenue from First Premier, the company said that just having the listing on its website "can result in increased internet traffic."