Feds seek up to $200M from CompuCredit, banks
Tuesday June 10, 2:55 pm ET
By Christopher S. Rugaber, AP Business Writer
FDIC, FTC seek $200 million in restitution from CompuCredit, banks over credit card practices
WASHINGTON (AP) -- Federal officials are seeking more than $200 million in fines and restitution from CompuCredit Corp. and two banks that allegedly engaged in deceptive credit card marketing practices.
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The Federal Trade Commission and Federal Deposit Insurance Corp. on Tuesday said CompuCredit and the banks failed to adequately disclose up-front fees and other conditions when marketing cards under the Aspire, FreedomCard, Tribute and other brand names.
The cards were largely marketed to individuals with weak credit histories, also known as the subprime market, regulators said.
"It is important for all consumers -- including those in the subprime market -- to have access to credit card products," said Lydia Parnes, director of the FTC's Bureau of Consumer Protection. "But the marketing of these products must be truthful."
The FTC alleged that Atlanta-based CompuCredit marketed a Visa card with a $300 limit, but charged $185 in fees without adequate disclosure. That caused card users to unintentionally exceed the limits and incur penalties, adding to their debt, Parnes said.
The FDIC said it is seeking up to $200 million in restitution from CompuCredit and two banks: Wilmington, Del.-based First Bank of Delaware and Brookings, S.D.-based First Bank & Trust.
Hundreds of thousands of consumers may be eligible for refunds, said FDIC board member Thomas J. Curry.
CompuCredit said in a statement that it will "vigorously contest" the charges, which the company claims "are untrue and without merit."
The company also said the FDIC has previously responded to consumer complaints by stating that CompuCredit's marketing materials complied with the law.
Representatives from the two banks didn't immediately return calls for comment Tuesday afternoon.
The FTC has sued CompuCredit in federal court, while the FDIC has begun administrative proceedings against the company and the two banks. A third bank, Columbus Bank and Trust in Columbus, Ga., has paid a $2.4 million penalty to settle the FDIC's charges, the agency said. Columbus Bank and Trust is owned by Synovus Financial Corp.
The legal trouble hit CompuCredit's shares hard. After earlier hitting a 52-week low of $5.52, the company's stock was down $2.38, or 27.1 percent, to $6.41 in afternoon trading. The shares have traded as high as $36.17 in the past year.
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