Credit Card Issuer Dinged $114 million
Posted by Anthony Demangone
The FDIC settled accusations of deceptive marketing aimed at CompuCredit. The Atlanta-based credit card company, which apparently is aligned with three different FDIC banks, will pay $114 million to settle the matter. Here's a news article that highlights what happened. And another. Here's a copy of the actual settlement with the FDIC.Â
CompuCredit was issuing credit cards to sub-prime borrowers. Fees and charges were eating up a substantial portion of the credit limit from the get-go. And their disclosures were allegedly...awful. And chew on this: much of the practices stemmed (allegedly) from 2005 or earlier. Three years later, and they are still dealing with this issue.
Do I think credit unions are out to deceive members? No. Do I think they are doing things that CompuCredit was doing? I don't think so. But there are lessons to take away from this.
- If you want to deceive consumers, you may make a quick buck. But this stuff seems to catch up with folks. Thanks to a number of shady credit card practices, recent rules changing UDAP have increased compliance costs for everyone that offers credit cards.Â
- When you make a mistake, correct it. CompuCredit indicates that these practices ended back in 2005. I don't know what happened, but a $114 million fine indicates to me that the FDIC was less than impressed about how CompuCredit handled this issue when it was brought to their attention.
- The fine may be a good way to remind folks at your credit union that playing fast and loose with disclosures is a dangerous game. Some folks may get away with it. But some will get hammered. Not Maxwell's Silver Hammer. But something that goes bang-bang nonetheless. (Sorry, I was listening to the Beatles quite a bit this weekend.)