Just two days after a federal judge in South Dakota rejected a bid by First Premier Bank for a gag order against the credit-card-comparison site CardHub.com, the subprime credit card issuer abandoned its controversial lawsuit in a one-sentence document filed late on Friday.
First Premier’s surrender comes after a backlash of criticism over its litigation tactics. The bank’s lawsuit, first filed last April, claimed that CardHub had violated trademark law by providing consumers with basic information about First Premier’s cards. The company asked the court to award it more than $5 million in damages and an injunction against CardHub’s listings, which allow consumers to compare First Premier’s products with other cards.
Branded by Consumer Reports as offering “America’s worst credit card,” the South Dakota bank is infamous for subprime cards with low credit limits, high annual interest rates, and high up-front fees–practices that drew the scrutiny of Congress, federal regulators, and consumer groups. It has charged consumers interest rates as high as 79% and as much as $170 in up-front fees for $250 worth of credit. “First Premier is one of the worst credit-card issuers out there,” said Chi Chi Wu, an attorney at the National Consumer Law Center. “It wouldn’t surprise me at all if First Premier” was “just trying to silence CardHub.”
Responding to media inquiries, First Premier said it filed the lawsuit to “retain control of its product.” At least one other credit-card-comparison website admitted to removing information about First Premier’s cards at the company’s request, and others do not list any First Premier cards. CardHub, however, decided to fight back, arguing that it has a First Amendment right to post truthful information about First Premier’s products.
On Wednesday, federal judge Lawrence Piersol of South Dakota rejected First Premier’s request for an order barring CardHub from linking to First Premier’s website. First Premier said such links were causing “consumer confusion” about the relationship between the two companies. The court, however, concluded that First Premier had not shown “any evidence of confusion.” Rather than provide such evidence, First Premier gave notice to the court late on Friday that it was abandoning the suit.
Odysseas Papadimitriou, the CEO and Founder of Evolution Finance, which runs CardHub, said, “We are gratified by this victory, and are glad that the court saw through First Premier’s attempt to use the trademark laws to silence us. Now we can go back to giving consumers all the information they need to intelligently navigate the credit-card marketplace.” (For more on CardHub's perspective, go here.)
CardHub’s lawyer, Deepak Gupta, described First Premier’s retreat as “a victory for credit-card customers everywhere,” and said the case “shows that bullying tactics to keep consumers in the dark won’t be tolerated in the court of public opinion or a court of law.” He emphasized that “the First Amendment protects the right of websites like CardHub to post truthful information, and lets consumers decide for themselves whether they want questionable products like First Premier’s.”