Blog Enforcement Watch December 28, 2015

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.