January 28, 2010
-
News: 1st Financial Fined Civil Penalties
The Federal Deposit Insurance Corp (FDIC) announced an agreement has been reached with the 1st Financial Bank USA in the case of unfair and deceptive practices against credit card users. Under the terms of the agreement, 1st Financial will be required to refund credit cardholders $10 million restitution and a $140,000 in civil penalties. The case stemmed from allegations that 1st Financial engaged in billing procedures that were unfair and deceptive and violated Section 5 of the Federal Trade Commission Act. The fees related to credit card over-the-limit fees that were assessed on the last day of the billing cycle and again on the first day of following billing cycle.
The FDIC also said that the bank failed to give the credit cardholders sufficient notice allowing them to rectify the situation prior to the bill date. Furthermore, the bank was negligent in providing clarity on their over the limit policy. According to a statement released by the FDIC, over 283,000 account holders were affected by the unfair and deceptive practices and will be entitled to restitution. Reimbursements will be issued to selected 1st Financial accounts that were active between June 1, 2005, and December 30, 2009. The bank will be notifying all credit cardholders involved in the settlement. For those accounts that have an existing card balance, the bank will issue a reimbursement of the fee. For cardholders that have no balance due or are closed, the bank will send them a check for approximately $37.
1st Financial Bank is based out of Dakota Dunes, South Dakota and specializes in personal loans, student loans, and credit card accounts. The terms of the agreement mandate that any funds unclaimed after 362 days from the consent date are to be donated to a nonprofit organization which provided financial education to consumers. The organization must first be approved by the FDIC. Additional terms include the bank's agreement to improve on its card's operation and overall compliance management systems.