After launching an investigation on the bank’s marketing practices last year, the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) concluded that Discovery Bank had engaged in “deceptive telemarketing tactics” to sell add-on products, such as payments suspension in the event of unemployment or hospitalisation, access to credit scores, and daily transactions monitoring for fraud protection.

The authorities said that Discovery Bank marketing strategies left customers with the impression that those services were free of charge.

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“Discover’s telemarketing scripts contained misleading language likely to deceive consumers about whether they were actually purchasing a product. 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,” FDIC and CFPB said in a joint statement.

The watchdogs added that Discover representatives sold the products without some consumers’ consent, or withheld material information about eligibility requirements for certain benefits.

Discover agreed to refund 3.5m customers that bought the products between 1 December 2007 and 31 August  2011.

David Nelms, chairman and chief executive of Discover, said in a statement: "We have worked hard to earn the loyalty of our cardmembers, and we are committed to marketing our products responsibly. As always, we will continue to strive to deliver the highest standards of customer service and satisfaction.”

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Discover also agreed to pay a civil penalty of USD14 m to be split between FDIC and CFPB.