Federal regulators are seeking to recover an estimated $217 million in restitution and fines from credit card companies that officials say deceived subprime customers and left some of them deeper in debt. The Federal Deposit Insurance Corp. and the Federal Trade Commission, in separate complaints filed last month, alleged that Atlanta-based CompuCredit and two partner banks — First Bank of Delaware and First Bank & Trust in Brookings, South Dakota — failed to disclose fees and terms to subprime borrowers who have blemished credit histories and often little experience with credit cards. A third bank, Columbus Bank and Trust, of Columbus, Georgia, has settled with regulators and agreed to pay $10 million in fines and restitution. These filings are to be among the largest actions of this kind thus far in the subprime lending mess.
Hundreds of thousands of subprime consumers across the nation could be eligible for reimbursement for credit card fees if money is recouped in these actions. The regulators are coming down hard on aggressive credit card lending. The Federal Reserve recently proposed rules that would crack down on “unfair and deceptive” credit card practices. The FTC filed the lawsuit in the U.S. District Court for the Northern District of Georgia, alleging that CompuCredit “misled” consumers in marketing a credit card with a $300 credit limit. Borrowers were hit with up to $185 in upfront fees that reduced their available credit to as little as $115. The FDIC, in an enforcement action, levied similar charges against CompuCredit and its partner banks. CompuCredit, through brands such as Tribute and Salute, is one of the nation’s largest marketers of credit cards to subprime borrowers, according to Andrew Davidson, vice president of Synovate Mail Monitor, which tracks these offers. In 2007, under the Tribute brand alone, CompuCredit sent out 34.2 million offers for credit cards, according to Mr. Davidson.
Source: USA Today
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.