The Investigators: 'Til Death Do Us Part
MEMPHIS, TN (WMC) - At Kay Jewelers, they like to say, 'Every kiss begins with Kay.'
It ends with a policy that may violate Tennessee disclosure and privacy laws.
Nineteen-year-old Colby James of the U of M area bought his girlfriend, 18-year-old Sarah Gallimore, a $300 promise ring at the Kay Jewelers in East Memphis' Oak Court Mall. He paid for the ring by opening a Kay Jewelers credit account.
A few days later, a thick envelope appeared in his mother Jennifer Williams' mailbox.
Inside: a $10,000 life insurance policy – in Colby James' name – naming Kay Jewelers as the beneficiary.
"It almost feels like a bounty on your head," Williams said.
"I've never seen anything like that before," said Faye Carson, financial expert and credit counselor for ClearPoint Credit Counseling Solutions. She and WMC Action News 5's legal sources said it's unusual for a retailer to issue a bona fide life insurance policy as collateral for a credit loan. Lawyers who reviewed the insurance policy said the law requires a creditor to disclose the policy and see the borrower's permission before it takes out what amounts to a 'credit life insurance' policy.
Yet Colby James said his Kay Jewelers sales agent never disclosed the insurance policy. "She didn't mention it," he said.
A Kay Jewelers sales agent never disclosed the policy to an undercover WMC Action News 5 producer when he inquired about the jeweler's credit program. It's not disclosed in Kay Jewelers' credit application, either.
"If you borrowed money from me, I could not get a life insurance policy on you without you acknowledging it, giving me permission to make myself the beneficiary of that policy," Williams said. "Just none of it made sense to me."
When WMC Action News 5's Andy Wise showed a copy of James' insurance policy to a sales agent at Oak Court Mall's Kay Jewelers, the agent revealed that James, as part of the credit program, bought Kay Jewelers' optional Payment Protection Plan. Its brochure does not explicitly disclose that a life insurance policy will be issued in the consumer's name, but it does indicate the plan provides "life benefits…up to $10,000" to make good on the account if the consumer is disabled or killed.
"Kay Jewelers offers a number of products related to its proprietary credit program," said Kim Kanary, vice president of public relations and social media for Kay Jewelers' parent company Sterling Jewelers, Inc. "Each product complies with applicable laws and regulations on a state-by-state basis."
James insisted that Kay Jewelers did not provide him a copy of either the payment plan brochure or the insurance policy at the point of sale. Kevin Walters, communications director of the Tennessee Department of Commerce & Insurance, said Tennessee code 56-7-906 requires that a copy of the policy "…be delivered to the debtor at the time the indebtedness is incurred."
In addition to concerns about the policy's disclosure, attorney and certified fraud examiner Kevin Snider said Kay Jewelers may have violated Tennessee privacy laws, including the Tennessee Identity Theft Deterrence Act of 1999 (TN Code 47-18-2101), when it shared James' personal information with a third-party: the insurance company.
"Having your Social Security number, date of birth, your home address, work address, any other information that would be disclosed out there, without authorization or consent, when all you're doing is buying some jewelry is ridiculous," Snider said.
Reviewing the policy, Memphis attorney Charles Higgins determined Kay Jewelers would not collect the entire $10,000 if something happened to Colby James. "In the terms, it states that they would only collect on the balance of what's owed," Higgins said.
The policy's terms also indicate the "...insurance coverage will cease when (the) account does not reflect an open balance." In other words, it ceases to exist once James pays off the balance.
"But there still should be full disclosure," Williams said of the 10-grand policy written in her son's name on a $300 credit purchase.
This issue is about privacy and the protection of your personal information. Just because you buy a credit payment protection plan for jewelry doesn't mean the jeweler can automatically take a life insurance policy out on you. It must get your permission first.
Carson said a jeweler or retailer also cannot deny you a line of credit for refusing the payment protection plan and insurance policy.
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