On July 26, 2018, the Federal Reserve Board (FRB) announced a multi-million dollar settlement with a Kentucky bank over allegations of unlawful banking practices in violation of Section 5 of the Federal Trade Commission Act.
According to the Consent Order, the bank made misrepresentations and failed to disclose certain information to consumers about its deposit account add-on services that the bank offered between November 1994 and January 2017. The FRB claims that consumers were falsely told that the “full bundle of benefits” of the add-on products, including an identity protection product, would be effective upon enrollment. However, according to the FRB, the bank failed to disclose that some benefits could only be obtained after taking additional steps post-enrollment. The Order alleges that the bank did not disclose to consumers that it would bill them for the add-on products regardless of whether they had taken all necessary steps to activate them. The FRB claims that the bank continued to collect affected consumers’ fees for years even though they were not receiving all of the benefits of the add-on products.
The Order requires the bank to pay at least $4.75 million in restitution to approximately 10,970 affected consumers. It also requires that the bank improve its compliance efforts and imposes injunctive relief.