FDIC Resolves FTC and ECOA Claims Against Utah State Nonmember Bank for $306,000

Banking  •  ECOA  •  FDIC  •  FTCA

On February 1, 2016, the FDIC announced that it reached a settlement with a Utah State nonmember Bank for $250,000, to resolve allegations of deceptive and unfair acts and practices under section 5 of the Federal Trade Commission Act for “failing to adequately inform consumers of promotion plan requirements concerning deferred interest charges assessed on open-end credit accounts.”  The settlement also resolved allegations that the bank and/or its strategic partners violated the Equal Credit Opportunity Act through the offering of such promotional plans.

To resolve the allegedly unfair and deceptive acts and practices, the Bank agreed to provide clear and conspicuous disclosures regarding the expiration date and periodic statement due date of any promotional credit plan, including additional details on how interest will accumulate under the plan.  The Bank also agreed to take steps to ensure “that all financing programs offered by or through any of the Bank’s strategic partners, or any third party, complied with ECOA.”  The Bank’s Compliance Management System (CMS) agreed to develop and implement a written compliance program within 90 days of the settlement to address these alleged violations, which is to include enhanced written procedures, training, internal monitoring, and compliance processes.

The Bank also agreed to audits of its program and to develop improved oversight of third-party agreements and services. Under the settlement, the bank will provide $56,000 in restitution to consumers to reimburse certain deferred interest charges incurred by these consumers and to refund certain annual fees assessed. The Bank further agreed to “correct all negative incident reports” made with the credit reporting agencies “whose accounts would not have generated a negative incident report but for the imposition of the deferred interest.”  Finally, the Bank agreed to pay a civil monetary penalty of $250,000 in connection with these alleged violations of law.

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