FDIC Settles Unfair and Deceptive Practices Claim Against Delaware Bank

On December 23, the Federal Deposit Insurance Corporation (FDIC) announced that it settled claims against a Delaware bank alleging unfair, deceptive, unsafe, and unsound acts and practices in violation of the Federal Trade Commission Act (Section 5).  According to the FDIC, the bank violated Section 5 by “failing to provide promised protections to consumers in the resolution of [prepaid card] account errors; failing to provide promised benefits for a debit card rewards program that the bank offered with a third-party services provider; and charging deceptive debit decline fees on a general purpose reloadable prepaid card.”  Although the cards were issued in conjunction with non-bank entities, the FDIC viewed the issuing Delaware bank as “responsible for ensuring” that programs offered by its third-party partners comply with applicable law.  To settle the FDIC’s claims, the bank agreed to pay a civil penalty of $3 million and restitution, which the FDIC estimates at $1.3 million for roughly 21,000 consumers.  The settlement also required the bank to improve its processes related to claims intake, investigation, and resolution.