The Federal Deposit Insurance Corporation [FDIC] announced Friday (Dec. 19) a settlement with CompuCredit Corporation (CCRT), Atlanta, Georgia, a company that provides credit and related financial services and products to the underserved consumer credit market.
CompuCredit was charged with deceptive marketing of subprime credit cards with three FDIC-supervised banks in violation of the Federal Trade Commission Act [FTC Act]. Two of the banks previously settled with the FDIC.
The FDIC commenced enforcement actions on June 10, 2008, against CompuCredit, First Bank of Delaware, Wilmington, Delaware [FBD], and First Bank & Trust, Brookings, South Dakota [FBT], for violations of the FTC Act in connection with the marketing of three types of credit card products. The most significant claims, in terms of restitution, relate to a fee-based credit card that was marketed to consumers with low credit scores.
The FDIC alleged that the solicitations failed to adequately disclose significant upfront fees and misrepresented the consumer’s initial available credit. The solicitations appeared to offer credit cards with a $300 credit limit; however, consumers were immediately charged as much as $185 in inadequately disclosed fees, leaving them with as little as $115 in available credit.
The settlement will result in an order that will correct the FTC Act violations, and provide restitution of approximately $114 million to consumers in the form of credits for certain fees arising from the deceptive marketing practices. Eligible consumers whose current balances are less than the amount of credits to be applied will receive cash refunds, the aggregate amount of which is estimated to be approximately $3.7 million. All other eligible consumers will receive credits only.
The order also includes a civil money penalty [CMP] of $2.4 million.
CompuCredit did not admit or deny liability as part of the settlement with the FDIC and with the FTC.